MEETING OF THE LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Members of the Liverpool City Region Combined Authority
Dear Member,
You are requested to attend a meeting of the Liverpool City Region Combined Authority to be held on Friday, 19th October, 2018 at 1.00pm in the Authority Chamber - No.1 Mann Island, Liverpool, L3 1BP.
If you have any queries regarding this meeting, please contact Trudy Bedford on telephone number (0151) 330 1330.
Yours faithfully
Interim Head of Paid Service
(Established pursuant to section 103 of the Local Democracy, Economic Development and Construction Act 2009 as the Halton, Knowsley, Liverpool, St Helens, Sefton and Wirral Combined Authority)
LIVERPOOL CITY REGION COMBINED AUTHORITY
AGENDA
1. APOLOGIES
2. DECLARATIONS OF INTEREST
3. MINUTES OF THE MEETING OF THE LIVERPOOL CITY REGION COMBINED AUTHORITY HELD ON 21 SEPTEMBER 2018 (Pages 1 - 6)
4. LCR METRO MAYOR ANNOUNCEMENTS AND UPDATES
POLICY
5. THE LIVERPOOL CITY REGION COMBINED AUTHORITY CORPORATE PLAN (*KEY DECISION) To consider the report of the Director of Policy and Strategic Commissioning. (Pages 7 - 34)
6. 'STRENGTHENING LOCAL ENTERPRISE PARTNERSHIPS' A MINISTERIAL REVIEW OF LOCAL ENTERPRISE PARTNERSHIPS (LEPS) To consider a report from the Managing Director of the LCR Local Enterprise Partnership. (Pages 35 - 70)
7. INTERNATIONAL HOLOCAUST REMEMBRANCE ALLIANCE WORKING DEFINITION OF ANTI-SEMITISM To consider the report of the Director of Policy and Strategic Commissioning. (Pages 71 - 74)
EMPLOYMENT AND SKILLS
8. LIVERPOOL CITY REGION SKILLS INVESTMENT STATEMENT 2019- 2020 (*KEY DECISION) To consider the report of the Director of Policy and Strategic Commissioning and the Portfolio Holder: Education, Employment, Skills and Apprenticeships. (Pages 75 - 108)
9. ADULT EDUCATION BUDGET COMMISSIONING PLAN (*KEY DECISION) To consider the report of the Project Director – Adult Education Budget Transition. (Pages 109 - 126)
ECONOMIC DEVELOPMENT
10. 'ONE FRONT DOOR' To consider the report of the Director of Commercial Development and Investment and the Portfolio Holder: Inclusive Growth, Economic Development, Digital and Innovation. (Pages 127 - 144)
11. LAUNCH OF THE STRATEGIC INVESTMENT FUND ROUND II To consider the report of the Director of Commercial Development and Investment and the Portfolio Holder: Inclusive Growth, Economic Development, Digital and Innovation. (Pages 145 - 216)
12. LIVERPOOL CITY REGION SINGLE INVESTMENT FUND (*KEY DECISION) To consider the report of the Director of Commercial Development and Investment and Portfolio Holder: Inclusive Growth, Economic Development, Digital and Innovation. (Pages 217 - 258)
13. LIVERPOOL CITY REGION SINGLE INVESTMENT FUND SKILLS CAPITAL WOMEN'S TECHNOLOGY TRAINING LTD (ENTERPRISE FUTURES 2) To consider the report of the Director of Commercial Development and Investment. (Pages 259 - 270)
HOUSING
14. PRIORITISING BROWNFIELD HOUSING SITES To consider a report of the Director of Policy and Strategic Commissioning. (Pages 271 - 276)
TRANSPORT
15. THE CONDITION OF THE KEY ROUTE NETWORK (KRN): KEY ISSUES AND NEXT STEPS To consider the report of the Director of Policy and Strategic Commissioning. (Pages 277 - 298)
FINANCE
16. COMBINED AUTHORITY BUDGET MONITORING STATEMENT AND TREASURY MANAGEMENT POSITION UPDATE TO 30 SEPTEMBER 2018 To consider the report of the Treasurer. (Pages 299 - 312)
GOVERNANCE
17. PUBLIC QUESTION TIME Members of the public will be given the opportunity to ask questions which have been submitted in accordance with Meetings Standing Orders No.11. A period of 30 minutes will be allocated for this item and valid questions will be circulated at the meeting.
Members of the public who wish to submit a question are asked to contact Democratic Services either by:
Email: [email protected]
Telephone: 0151 330 1330
In writing: Democratic Services, Merseytravel, No. 1 Mann Island, PO Box 1976, Liverpool, L3 1BP.
A pro-forma will be supplied and must be returned by the deadline of Monday 15 October 2018.
18. PETITIONS AND STATEMENTS Members of the public who wish to submit a single petition or statement in accordance with Meetings Standing Orders No.11 are asked to contact Democratic Services either by:
Email: [email protected]
Telephone: 0151 330 1330
In writing: Democratic Services, Merseytravel, No. 1 Mann Island, PO Box 1976, Liverpool, L3 1BP.
A pro-forma will be supplied and must be returned by the deadline of Monday 15 October 2018.
MINUTES
19. MINUTES OF THE TRANSPORT COMMITTEE HELD ON 6 SEPTEMBER 2018 (Pages 313 - 324)
This page is intentionally left blank Agenda Item 3
LIVERPOOL CITY REGION COMBINED AUTHORITY
PUBLICATION: 21 SEPTEMBER 2018
DEADLINE FOR CALL-IN: 28 SEPTEMBER 2018
FOLLOWING THE CALL-IN PERIOD, DECISIONS INCLUDED IN THESE MINUTES MAY THEN BE IMPLEMENTED WHERE THEY HAVE NOT BEEN SUBJECT TO A CALL-IN.
* DENOTES KEY DECISION
At a meeting of the Liverpool City Region Combined Authority held in the Authority Chamber - No.1 Mann Island, Liverpool, L3 1BP on Friday, 21st September, 2018 the following Members were
P r e s e n t:
Metro Mayor S Rotheram Chairperson of the Combined Authority (in the Chair)
Mayor J Anderson OBE, Councillor P Davies, Mr A Hamid MBE, Councillor D Long, Councillor G Morgan, Councillor R Polhill, Councillor J Fairclough (Substitute Member for Councillor I Maher), Councillor L Robinson (Portfolio Holder: Transport and Air Quality) and Councillor T O'Neill (Associate Member).
64. APOLOGIES FOR ABSENCE
Apologies for absence were received from Councillor I Maher, Rt Hon Jane Kennedy, Councillor I Moran (Associate Member), Councillor S Powell (Deputy Portfolio Holder: Culture, Tourism & Visitor Economy), Councillor L Robertson-Collins (Deputy Portfolio Holder: Education, Employment, Apprenticeships and Skills), Councillor E Spurrell (Deputy Portfolio Holder: Criminal Justice), Councillor C Thomas (Deputy Portfolio Holder: Policy Resources, Strategy & Delivery), Professor Dame Janet Beer (Mayoral Advisor: Higher Education), Luciana Berger MP (Mayoral Advisor: Mental Health), Reverend Canon Dr Ellen Louden (Mayoral Advisor: Community and Voluntary Sector), Gideon Ben-Tovim OBE (Mayoral Advisor: Natural Environment), Barbara Spicer (Mayoral Advisor: Social Housing Growth) and Sara Wilde-McKeown (Mayoral Advisor: Visitor Economy)
65. DECLARATIONS OF INTEREST
It was reported that no declarations of interest had been received.
66. MINUTES OF THE MEETING OF THE LIVERPOOL CITY REGION COMBINED AUTHORITY HELD ON 24 AUGUST 2018
RESOLVED – That the minutes of the meeting of the LCR Combined Authority held on 24 August 2018 be approved as a correct record and signed by the Metro Mayor.
Page 1 67. LCR METRO MAYOR ANNOUNCEMENTS AND UPDATES
Metro Mayor S Rotheram provided the LCR Combined Authority with a summary of some of the key activities he had undertaken in recent weeks.
The Metro Mayor provided Members with an update in relation to his recent Ministerial meetings held in London on 10th September 2018 where he met with officials and ministers in the Treasury and DCMS and with the Secretary of State for Transport and discussed further powers and funding for the city region. He reported that he had positive discussions with senior officials at DCMS about the plans for a digital fibre spine and a team from the Department would be visiting the city region before Christmas 2018 to begin joint-work on the project. He reported that he also met with the Secretary of State for Transport, Chris Grayling and discussed the issues facing Northern Transport and in particular on Northern rail. Chris Grayling signed his support for cross-rail for the North and also for the city region to take further control of the Merseyrail network and despite talks on this issue being at an early stage, the Metro Mayor informed Members that further updates would be provided to the Combined Authority in due course. He also reported on his discussions with the Treasury, where he raised the ongoing issues of the Royal Liverpool hospital and expressed to Ministers the huge concerns that people in the city region have about the situation with the new hospital and that it was simply unacceptable that 18 months ago, the first issues were raised about the project and it is no closer to a solution. He reported that Ministers have promised that they would be willing to examine possible funding solutions for the hospital and that he would be holding them to that promise.
The Metro Mayor also reported that alongside Mayor Joe Anderson OBE and Councillor Phil Davies, he had the unique experience of meeting with Jean-Luc Courcoult and his team from Royal de Lux on Monday as they looked ahead to the third and final instalment of the Giants saga in the Liverpool City Region which was just two weeks away. He reported that on the Giants two previous visits to Liverpool it attracted crowds from far and wide and generated almost £80m for the local economy, but more importantly, brought together families, friends and neighbours to enjoy the spectacle and had inspired debate and discussion as only the best art could do. He also informed Members that the third and final instalment of the series promised to be even bigger and better and that he was delighted that on this occasion the Giants would be able to traverse the city boundaries and take a trip over the Mersey to the Wirral.
The Metro Mayor also reported that on Monday 17th September 2018 he met with the Jewish Leadership Council and representatives of the Jewish community from across the City Region. Everyone was concerned about the latest figures from the Community Security Trust, which showed that nationally instances of anti- Semitism rose by 30% in the first six months of 2017 and remained at record levels. With the support of the other Leaders, he announced that the Combined Authority would adopt the full IHRA definition of anti-Semitism and informed Members that a paper would be submitted to next month’s CA meeting to formalise arrangements. He reported that the city region had a proud record historically of welcoming people of all backgrounds and faiths and that it continued and there could be no excuse for anti- Semitism in any section of society and the IHRA definition committed the Combined Authority to fight this pernicious and unacceptable form of racism.
Page 2 68. ROLLING STOCK UPDATE: INDUSTRIAL ISSUES
The LCR Combined Authority considered the report of the Interim Head of Paid Service, Frank Rogers which provided an update on the ongoing industrial issues on the Merseyrail Network and provided a summary of the progress made by all parties in seeking a formal reconciliation.
Councillor L Robinson, Chair of the Transport Committee informed the meeting that it was ‘good news’ and a product of negotiations and dialogue that had been long overdue and thanked everyone for their involvement including the officers and RMT Union and local TU representatives. He reported that it has been agreed in principle and there was still more work to be done and that he anticipated that it would be completed over the coming months and was looking forward to the complete agreement for both users and staff.
Councillor Derek reiterated the views of Councillor Robinson and thanked everyone for their contributions and asked that the ongoing discussions be monitored to observe the impact of the finance and ensuring it could be delivered and that the Merseyrail franchise is accepted.
The Metro Mayor, reminded Members that it was the first rolling stock owned by an authority and the Combined Authority was taking the lead on transport issues across the UK.
RESOLVED – That the Liverpool City Region Combined Authority:
(i) recognise the positive progress arising from the conciliation process initiated by the Metro Mayor that started in April 2018 and is still ongoing;
(ii) thank all parties to this process for the positive and constructive way in which a resolution to this dispute is being sought;
(iii) note that the Metro Mayor, on behalf of the Liverpool City Region Combined Authority, has reached an agreement in principle, with the RMT and Merseyrail Electrics which formally commits all parties to seeking a sustainable and affordable way to extend the coverage of a second person on Merseyrail services beyond that anticipated by the current agreement;
(iv) note that the agreement in principle recognises that all parties are in agreement that the proposed method of train despatch that will be adopted once the new fleet is operational is both safe and appropriate to the Merseyrail network;
(v) note that it was always the case that there would be a range of staff on the new trains but recognise that extending the coverage of a second person on each train is nonetheless desirable in that it will enhance the customer experience and assist in revenue protection;
(vi) note that the business case presented to the Combined Authority meeting on 16 December 2016 remains valid;
(vii) note that there remain significant financial risks to the Combined Authority that need to be addressed before any operational changes to
Page 3 the agreed mode of operation for the new fleet can be formally approved by all parties;
(viii) authorise officers to explore options for maintaining a second person on each train once the new fleet is operational and to ensure that any options presented to the Combined Authority by Merseytravel are accompanied by a robust analysis of financial risk; and
(ix) seek formal assurances from the Director of Corporate Services in his role as Combined Authority Treasurer that any agreement to extend the provision of a second person on Merseyrail services is affordable and sustainable within the overall financial health of the Combined Authority.
69. DISPOSAL OF THE LAND AT BACK GILMOSS LANE, LIVERPOOL
The LCR Combined Authority considered a Merseytravel report presented by Jill Coule, Chief Legal and Monitoring Officer that sought approval for Merseytravel to dispose of the land at Back of Gilmoss Lane, Liverpool.
RESOLVED – that the Liverpool City Region Combined Authority approves the sale by Merseytravel of the land at Back Gilmoss Lane.
70. PRODUCING THE LIVERPOOL CITY REGION COMBINED AUTHORITY CORPORATE PLAN
The LCR Combined Authority considered the report of the Director of Policy and Strategic Commissioning, Kirsty Pearce which explained the approach and scope being used to produce the LCR Combined Authority Corporate Plan for 2018- 2010.
RESOLVED – That the Liverpool City Region Combined Authority:
(i) agree the approach for producing the Corporate Plan for 2018- 2020; and
(ii) agree that the Corporate Plan be brought to the LCR Combined Authority meeting in October 2018 for consideration and endorsement.
71. COMBINED AUTHORITY APPOINTMENT
The LCR Combined Authority considered the report of the Interim Head of Paid Service, Frank Rogers which recommended that Councillor Gill Neal, St Helen’s Metropolitan Borough Council be appointed to the ESIF Committee.
RESOLVED – That Councillor Gill Neal, St Helen’s Metropolitan Borough Council be appointed to the ESIF Committee.
72. PUBLIC QUESTION TIME
The Metro Mayor reported that no public questions had been received.
73. PETITIONS AND STATEMENTS
The Metro Mayor reported that no petitions or statements had been received.
Page 4 74. MINUTES OF THE TRANSPORT COMMITTEE HELD ON 9 AUGUST 2018
RESOLVED – That the minutes of the Transport Committee held on 9 August 2018 were received and confirmed by the Liverpool City Region Combined Authority.
75. MINUTES OF THE OVERVIEW AND SCRUTINY COMMITTEE
RESOLVED – That the minutes of the Overview and Scrutiny Committee held on 25 October 2017, 24 January 2018, 18 April 2018 and 1 August 2018 were received and confirmed by the Liverpool City Region Combined Authority.
Minutes 64 to 75 be received as a correct record on the 19th day of October 2018.
Chairperson of the Combined Authority
(The meeting closed at 1.20 pm)
Page 5 This page is intentionally left blank Agenda Item 5
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF POLICY AND STRATEGIC COMMISSIONING
THE LIVERPOOL CITY REGION COMBINED AUTHORITY CORPORATE PLAN
1. PURPOSE OF REPORT
1.1 This report presents the Liverpool City Region Combined Authority Corporate Plan 2018 – 2020. The full Plan is attached at Appendix 1.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority agree the Corporate Plan for 2018- 2020.
3. BACKGROUND AND CONTEXT
3.1 Scope and Purpose of the Plan
At its meeting on 21st September, the Combined Authority agreed the approach to produce the Corporate Plan for 2018-20. It was agreed that the Plan should be a high level summary of key activities for a number of priority themes; and that it will be underpinned by a suite of more detailed individual strategies and delivery plans which will be developed once the corporate plan is agreed. The Plan includes a number of key elements:
Section 1:
Liverpool City Region Combined Authority Summary Our approach
Page 7 Section 2:
Strategic Priorities
A dynamic, inclusive and prosperous economy which benefits every part of the City Region Jobs, skills and career opportunities for all A high speed digital network that connects the whole region to the world A transport network that connects people, goods and business Good quality and affordable housing A greener, cleaner place to live A world class culture and visitor experience More decisions taken locally
Section 3:
Key deliverables
High level ambitions, objectives and key actions that form our strategic plan for 2018-20
4. RESOURCE IMPLICATIONS
4.1 Financial There are no financial issues associated with this report.
4.2 Human Resources There are no human resource issues associated with this report.
4.3 Physical Assets There are no physical asset issues associated with this report.
4.4 Information Technology There are no Information Technology issues associated with this report.
5. RISKS AND MITIGATION
5.1 There are no direct risks to the Combined Authority.
6. EQUALITY AND DIVERSITY IMPLICATIONS
6.1 There are no specific equality and diversity implications arising from the recommendations in this report. However, the Corporate Plan will set out how our strategic priorities will help to deliver inclusive growth and tackle economic and social inequalities.
Page 8 The Combined Authority is developing specific measures to ensure that projects contribute towards equality of opportunity and fairness in the City Region. A project’s potential to generate inclusive growth and social value will become part of our appraisal criteria in committing public money.
7. COMMUNICATION ISSUES
7.1 The final version of the Corporate Plan will be published on the Combined Authority’s website.
8. CONCLUSION
8.1 This report summarises the key elements of the Combined Authority Corporate Plan 2018-20. The full Plan is attached at Appendix 1.
KIRSTY PEARCE Director of Policy and Strategic Commissioning
Contact Officer(s): Rose Boylan [email protected]
Appendix - Corporate Plan
Page 9 This page is intentionally left blank
A plan for Liverpool City Region Combined Authority 2018-2020
Page 11 [INSIDE FRONT COVER - BLANK PAGE]
Page 12
A Plan for the Liverpool City Region Combined Authority 2018-20
CONTENTS
Section Page
Introduction
Section 1
a) Liverpool City Region Combined Authority b) Our approach
Section 2
Strategic Priorities
Section 3
Key deliverables
Page 13 BLANK PAGE
Page 14
A Plan for the Liverpool City Region Combined Authority 2018-20
Introduction
We share huge ambitions for Liverpool City Region and our people and shoulder a huge collective responsibility to work together to achieve them.
These ambitions will be delivered by making the most of our shared assets – our natural resources, our creativity and inventiveness, our determination and our shared values.
Devolution has given us the opportunity to make our own decisions and build our own future, one which delivers prosperity for all of our 1.5 million residents.
By working together across our six constituent local authorities we have already achieved a great deal, attracting more than one billion pounds of additional investment in transport, skills, economic development and housing.
We are already making major investments to support the creation of local jobs, apprenticeships and new homes.
This is a strong start but we can and will achieve more. Together we have an opportunity to transform our city region.
This plan sets out how, by taking decisions locally, we will harness the incredible assets of our city region to create a place where we all share in the benefits of a booming local economy and no-one is left behind.
Page 15 SECTION 1 a) The Liverpool City Region Combined Authority
The Liverpool City Region is governed by the Liverpool City Region Combined Authority and its constituent councils. The Combined Authority was established on 1 April 2014 and the membership includes the Liverpool City Region Metro Mayor, five local authority leaders of Halton, Knowsley, Sefton, St Helens and Wirral Councils, the elected Mayor of Liverpool City Council and the Chair of the Local Enterprise Partnership. Warrington and West Lancashire Councils are Associate Members of the Combined Authority.
We have ambitious aims to grow our economy and attract more residents and businesses to live, work, study, visit and invest in the Liverpool City Region. We are helping to deliver this by ensuring that our funding and resources are being targeted at the right issues for our area.
The Combined Authority works collaboratively with the Liverpool City Region Local Enterprise Partnership and its constituent local authorities to promote and deliver inclusive economic growth. The Local Enterprise Partnership also ensures that the views of businesses are represented in strategic decision making.
We want to deliver sustainable economic growth which benefits all in the City Region, delivering added value to the individual efforts of Local Authorities through creating the conditions for increases in the number and quality of jobs and the level of local employment. b) Our approach
It is not just what we do but how we do it that will be vital to successfully shaping our work. We will put the City Region first; act with respect; and be action focussed.
Our approach will drive our success:
We’ll be innovative and will succeed by being different.
We’ll be inclusive, engaging all our communities including residents, business, the voluntary, community and social enterprise (VCSE) sector, as well as civic leaders, in collectively developing, sharing and delivering our vision.
Page 16
We’ll be brave, inventive and ambitious. We know we will not transform our region or change lives unless we are willing to take risks, break new ground and set ourselves big challenges.
We’ll be driven by evidence, with decisions grounded in robust analysis of our strengths, issues and opportunities.
We’ll be professional, collaborative and focused. We’re creating a new organisation of skilled, experienced and motivated people to deliver this work - supporting each other, serving our communities and delivering a shared vision.
We’ll be loyal, passionate and proud. We’re a place with an extraordinary history, character and culture. We’re rooted in its values, proud of its history and dedicated to its people.
We’ll be responsible as well as ambitious and will strive to leave our environment in a better state than we found it.
Page 17 SECTION 2 STRATEGIC PRIORITIES
Our strategy for achieving this shared vision is built around eight high level priorities:
1. Priority One: A dynamic, prosperous, inclusive economy which benefits every part of the city region 2. Priority Two: Jobs, skills and career opportunities for all 3. Priority Three: A high speed digital network that connects the whole region to the world 4. Priority Four: A transport network that connects people, goods and business 5. Priority Five: Good quality and affordable housing 6. Priority Six: A greener and cleaner place to live 7. Priority Seven: A world class culture and visitor experience 8. Priority Eight: More decisions taken locally
We recognise that there is great complexity in our modern world and that however priorities are identified and organised there are always relationships and interdependencies between them. To successfully deliver our overall vision will mean working hard at shared understanding and joint working between partners across them all our priority areas.
The next part of this document sets what we will do – those high level priorities, objectives and key activities that form our strategic plan for 2018-20. This will help us all to understand how we are doing, enable us to be transparent and accountable, and to share our successes, challenges and learning as we strive to achieve our shared vision.
Page 18 SECTION 3 KEY DELIVERABLES
LCR CA PRIORITY 1: A dynamic, inclusive and prosperous economy which benefits every part of the City Region
Portfolios Inclusive Growth, Economic Development, Digital; and Innovation and Business Growth and Brexit Portfolio Holders Cllr Phil Davies and Asif Hamid
VISION STATEMENT
Our ambition:
The Combined Authority uses the policy making and investment powers our game-changing devolution agreement brought to make the city region more prosperous, productive, sustainable and inclusive.
We want there to be more high-quality jobs, places people want to live and work and improved environmental sustainability. The Combined Authority has identified and progressed large scale projects capable of producing transformational economic growth in the city region and has identified economic strengths to build on. We want to support businesses to start up and scale up and to support innovation across the City Region, ensuring companies have the support they need to grow, including investigating the scope for a stronger account management approach. We also want our City Region to be well prepared for the UK’s exit from the European Union, and the challenges and opportunities this presents, helping to maintain and build our reputation as a global, outward facing economy.
We also want to use the Combined Authorities tools for inclusive growth by shaping policy and investment decisions to share the benefits of a growing economy widely, creating opportunity and jobs for as many people of the city region as possible, enabling all to participate in creating a successful and prosperous city region, and to be fairly rewarded for doing so.
Our aim is for the City Region’s business base to be growing with more sustainable companies launched at a higher rate, existing companies with growth potential receiving support to accelerate and maintain their growth and more businesses are attracted to operate here. We want companies interested in investing in the city region (whether by investing, setting up or growing operations) to have a single point of contact to access and coordinate support and an excellent customer journey.
Page 19 LCR CA PRIORITY 1: A dynamic, inclusive and prosperous economy which benefits every part of the City Region The table highlights the key objectives to be achieved Objectives Headline actions 2018-20 1. To have a Local Industrial Strategy that links local priorities to investment Produce an evidence based Local Industrial Strategy and aim st opportunities to generate economic growth as well as environmental to have undertaken the 1 evidence phase by the end of sustainability and community wellbeing 2018
2. Generate inclusive growth by linking investment to measures that improve Integrate inclusiveness into investment processes, work with social fairness, including development & implementation of a Fair Employment businesses to introduce a fair employment charter and Charter conduct an audit of the public purse to identify local spending options
3. Create a clear Investment Strategy to maximise the benefit of the combined authority’s investment funds, maximise funds available for investment and Complete a new SIF investment strategy, launch and commit Page 20 Page identify projects where investment will maximise the public benefit. This will available funds under a new SIF round (commit the greater include innovative, transformational and large scale investment propositions; of £100m and 90% of SIF funds available in this planning measures to increased levels of business starts, supporting scale up, period) investment, innovation and growth across the whole City Region Launch One Front Door for inward investment 4. Adopt a City Region approach for business that updates, aligns and coordinates
support for business seeking to start, invest or grow working in partnership Investigate the opportunity for new business-research with LAs and stakeholder organisations across the City Region collaboration initiatives and opportunities for 5. Increase the City Region’s international profile in partnership with business and commercialisation; and commit to three new initiatives in Universities to increase international trade, investment, research and students, this planning period and grow the visitor economy and to sustain and build an environment which attracts and nurtures talent Ensure strategic linkages and create relevant content to support development of the LCR Spatial Development Strategy
Work with central Government and the local business community to develop an evidence base of potential impacts of EU exit on the LCR LCR CA PRIORITY 2: JOBS, SKILLS AND CAREER OPPORTUNITIES FOR ALL
Portfolio Education, Employment, Apprenticeships and Skills Portfolio Holder Cllr Ian Maher
VISION STATEMENT
Our ambition:
We want to help people of all ages to get the skills they need and tackle our productivity gap, including aiming for higher productivity and a lower incidence of skills shortages in key growth sectors. We are already working well on employment and skills. We have completed our Area Based Review; consulted with 1,800 employers on a detailed Skills Survey; and agreed our Skills Strategy. We are delivering on significant employment and skills programmes, helping people into work and enabling them to access the skills and wider support they need. This has only been possible through the partnership working. It provides a sound basis for the next phase of our activity.
We want a higher percentage of our young people to leave school with the qualifications they need in English, Maths and with digital skills and high levels of work readiness. We also want a higher percentage of the working age population are in employment. With in-work poverty at record levels, more and more people are finding that work no longer pays to provide a decent quality of life so we will also work with employers so that good quality jobs account for a higher percentage of all jobs in the city region.
We will work with employers to understand the drivers of productivity and help them best address skills gaps so they invest more in the skills of their workforce, including through apprenticeships. We will help and encourage employers to develop medium term workforce plans that include progression pathways and succession plans to address the issues of an ageing workforce. We will monitor and plan for the potential impacts of the UK’s exit from the European Union on residents and employers. This should include considering our support for employers and any new opportunities for residents which may help to address the local productivity gap.
We aim to have much simpler systems and more joined up support processes, driven by stable funding and characterized by clarity, inclusivity and responsiveness.
Page 21 LCR CA PRIORITY 2: JOBS, SKILLS AND CAREER OPPORTUNITIES FOR ALL The table highlights the key deliverables to be achieved Objectives Headline actions 2018-20 1. More multi-agency support for young learners to help Start to deliver our skills strategy, including through the specific actions below raise attainment levels among young people Design and launch an Apprenticeship Application portal 2. Widen availability of employability and skills services – Commission support to improve inclusion and narrow gaps for under-represented groups flexible provision and more effective matching of Deliver and Implement Skills for Growth Action Plans in support of national Sector Deals individuals to employers with current available job Establish digital skills competency framework through a local Digital Skills Partnership, validated by 3. Develop planned approach to graduate retention a Digital Skills Passport 4. Promote employer collaboration to find solutions to Create and promote clearer Labour Market Information and progression pathways through
Page 22 Page current and potential skills shortages education and learning leading to sustainable and good quality employment
5. Improved understanding of job opportunities and links Deliver and evaluate the innovative Households into Work programme between employers, Jobcentre Plus and local employment Co-produce with employers a skills and job redesign plan to tackle the challenge of replacement support services demand as employees retire 6. Explore opportunities for retraining linked to enhancing Encourage providers to deliver Technical Education courses and qualifications that meet needs of business profitability and employee opportunities employers, including preparing for the rollout of T levels
7. Increase take up of Apprentices across the City Region Work with DfE to explore the potential for a more targeted approach to apprenticeships provision, including opportunities to deploy apprenticeship levy funds locally 8. Prepare for devolution of the Adult Education Budget to Work with employers to understand how best to take an approach to skills which works for the Combined Authority from academic year 2019/2020 businesses 9. Work with businesses to explore opportunities to meet Design and implement commissioning plan for the devolved Adult Education Budget skills needs for the future Commission European Social Fund activities to meet the needs of residents as set out in the Skills 10. Monitor the potential impacts of the UK’s exit from the Strategy European Union on residents and employers. This should Ensure strategic linkages to support development of the LCR Spatial Development Strategy include considering our support for employers and any new opportunities for which may help to address the local Review the potential impacts on labour supply of the UK’s exit from the European Union, including productivity gap how these may present new opportunities to support the local workforce and address the local productivity gap
LCR CA PRIORITY 3: HIGH SPEED DIGITAL NETWORK THAT CONNECTS THE WHOLE REGION TO THE WORLD
Portfolio Inclusive Growth, Economic Development, Digital and Innovation Portfolio Holder Cllr Phil Davies
VISION STATEMENT
Our ambition:
We want to be the digital gateway to the fourth industrial revolution (and subsequent developments) having been the gateway to the first. We also want to be the most digitally connected city region in the UK by interlinking our global and other assets to each other and all parts of the LCR via a full fibre network and maximising other emerging technologies including 5G.
We want to maximise opportunities offered by transatlantic internet cables directly linking the UK to North America, the world’s 2nd largest internet exchange (IX Amsterdam) and on to the rest of Europe, which lands at Southport.
We also want to play a leading role on the Artificial Intelligence Grand Challenge in the Government’s Industrial Strategy. We already have SciTech Daresbury - one of the UK’s two primary science and innovation campuses which hosts one of the world’s top 25 supercomputers (and the most powerful in the UK dedicated to industrial R&D) at the STFC Hartree Centre, an associated data centric industry cluster, and the only IBM Research Lab in the UK plus deployment of its world-leading Watson artificial intelligence platform. And the Knowledge Quarter Liverpool is home to one of only 6 initial 5G testbeds in the UK, linked to Sensor City, one of the world’s only incubators dedicated to the development and deployment of IoT technologies. The LCR also intends to build on these and the UK’s leading sub-national 4IR business support programme LCR 4.0 to be lead region for the development and application of industrial digitisation technologies.
We also intend to maximise our 4 Global Digital Exemplar health trusts (the only place in the UK to have so many) to be the lead UK region for applying digital and medical technologies.to transform human health and care, epitomised by Alder Hey’s vision to be the world’s first “Living Hospital”.
Page 23 LCR CA PRIORITY 3: DIGITAL – HIGH SPEED DIGITAL NETWORK THAT CONNECTS THE WHOLE REGION TO THE WORLD
The table highlights the key deliverables to be achieved
Objectives Headline actions 2018-20 1. Create an integrated full fibre network throughout the LCR Lay the foundations for full fibre network delivery by agreeing the model and establishing governance 2. Establish a series of Digital Exchanges (DXs) on the new network and across the LCR structures (governance to be operational by year end 3. Maximise the deployment of 5G 2019)
4. Support development of the digital and createch sector Commit to a Digital Infrastructure Action Plan mapping 5. Apply digital technologies and data analytics to deliver public sector transformation as an indicative “Superspine” route, estimated costs, well as private sector innovations to support innovation, improvements in productivity potential Digital Exchange (DX) locations, intended
Page 24 Page and growth across the economy delivery model and approaches, indicative governance structures, estimated economic benefits; submit SIF 6. Consolidate the LCR’s UK-leading position on the 4th Industrial Revolution, industrial funding request by the end of 2018 and launch digitisation development in this planning period 7. Harness the City Region’s world-leading High Performance Computing & Cognitive Computing capabilities to accelerate cross-sector growth & productivity, & develop a Support the extension of the Liverpool 5G testbed and world-class data-centric & disruptive digital technologies and artificial intelligence wider roll out
Create and launch a commercialisation and growth plan to capitalise on new digital infrastructure; agree the overall approach in early 2019
Complete digital/createch sector mapping
Support development of the digital elements of the LCR Spatial Development Strategy LCR CA PRIORITY 4: A TRANSPORT NETWORK THAT CONNECTS PEOPLE GOODS AND BUSINESSES
Portfolio Transport and Air Quality Portfolio Holder Cllr Liam Robinson
VISION STATEMENT
Our ambition:
We want to create a fully integrated, modern and inclusive transport network that benefits all in the city region, connecting people to employment, education, leisure and new opportunities. At the same time, we must reduce the transport network’s impact on our environment. We have commissioned a brand-new train fleet for Merseyrail and invested £460 million this and the associated project costs. The fleet will be the most modern in the country and publicly owned by the city region and will support further investment in the capacity and quality of our local rail network.
We are testing the range of powers at our disposal to create a bus network that works for our residents and enhances the economic, social and environmental benefits of bus transport. We want more people to use the bus to support our policies on air quality, carbon reduction, congestion, inclusion and access.
The role of walking and cycling, for shorter journeys in particular, is critical and we will invest in the enhancement of these networks to remove barriers and encourage a shift from car trips to more active travel modes. And our port- related and logistics assets mean we need to plan for the movement of goods in a way that reduces its impact on people and on the environment.
We are also working closely with Transport for the North and have already secured a commitment from the Government of £100m to link the City Region to High Speed 2 and Northern Powerhouse Rail. As a strategic partner in Transport for the North we will continue working to secure a new faster, Liverpool to Manchester rail line and a new HS2/NPR station in Liverpool.
We are building the evidence on the condition of the Key Route Network and our most important roads so we can take action to improve their condition and efficiency.
Page 25 LCR CA PRIORITY 4: A TRANSPORT NETWORK THAT CONNECTS PEOPLE, GOODS AND BUSINESSES
The table highlights the key deliverables to be achieved
Objectives Headline actions 2018-20 1. Invest in public transport and improve cycling and walking Invest £134m over the next four years in public transport and improving cycling opportunities and walking facilities including through the Transforming Cities Fund
2. Tackle poor air quality across the city region Produce an Air Quality Action Plan for the city region that maximises the Combined 3. Make it easier to use our transport network and support a Authority’s funding and policy responsibilities in order to support the reduction of reduction in car trips in particular harmful emissions from transport
4. Make transport more affordable, initially looking at Invest in Smart Ticketing, supported by a comprehensive review of our ticketing options relating to apprentices aged 19 – 24 Page 26 Page products 5. Ensure new regulatory powers over buses are tested fully and maximised to create a bus network that works for all Introduce a price discount for apprentices aged 19 - 24 residents Produce a Key Route Network of the city region’s most important roads and 6. Secure a new faster Liverpool to Manchester rail line and a develop action plans and priorities for the Key Route Network of LCR’s most new HS2/NPR station in Liverpool important roads, and tools that support an enhanced bus and local rail offer 7. Clearly articulate our vision for transport across the LCR, including recognising the importance of existing hubs and Produce a Mayoral Transport Plan that sets out our vision and delivery plans for connections to effectively guide the commissioning of transport; and supports our Local Industrial Strategy, Spatial Development Strategy activities and allocation of funds and priorities for a cleaner, heathier & more inclusive LCR 8. Work with Transport for the North and its partners, to maximise opportunities to improve inter-city connectivity Work up the case for increased investment in cross Northern connectivity including and freight capacity across the North the opportunities related to freight to deliver out long term Rail Strategy
Ensure strategic linkages and create relevant Transport content to support development of the LCR Spatial Development Strategy LCR CA PRIORITY 5: GOOD QUALITY AND AFFORDABLE HOUSING
Portfolio Housing and Spatial Planning Portfolio Holder Cllr Derek Long
VISION STATEMENT
Our ambition:
We want everyone in the city region to have access to a good-quality home in a safe neighbourhood - safe, secure, good quality housing is a basic human right. We have already worked with all of our local authorities to establish how many homes we need across the city region and have ambitious plans.
We will adopt a brownfield first approach to development and are looking at funding options to unlock currently undevelopable brownfield sites, including working with Homes England.
We are also working to tackle homelessness in partnership with our constituent local authorities, Housing Associations and the whole community and are developing Housing-led approaches including the implementation of Housing First as part of a national pilot. And we want to work with key organisations in the housing sector to improve the quality of housing in the City Region, including social housing.
Housing cannot be considered in isolation and we will use our powers in areas such as planning, transport, education and skills to ensure we take a holistic approach to ensuring that housing can help deliver inclusive growth and support wider public sector reform.
By creating the right housing offer we can help attract investment, economic growth and talented people to the city region and to retain graduates from our world-class universities.
We will create the Liverpool City Region Land Commission to provide a public sector wide body to co-ordinate the use of the public estate.
Page 27 LCR CA PRIORITY 5: GOOD QUALITY AND AFFORDABLE HOUSING
The table highlights the key deliverables to be achieved
Objectives Headline actions 2018-20 1. Understand the need for new homes across the city region Ensure strategic linkages and create relevant Housing content to support development of the 2. Adopt a brownfield first approach to housing development LCR Spatial Development Strategy 3. Successfully implement Housing First delivery across the city region and develop housing led approaches to tackling homelessness Complete analysis of the cost of remediating brownfield sites on the brownfield register 4. Bring forward infrastructure funding and remedial measures needed to support future housing
development Implement the Housing First scheme
Page 28 Page 5. Work with the City Region’s Registered Providers to increase the number of homes for social and affordable rent Produce a Housing Strategy with the aim of increasing the number of high quality homes 6. Align development throughout the Liverpool City Region to ensure delivery of good quality across the city region homes available to Liverpool City Region residents, including in the private rented sector
7. Regenerate and reinvigorate neighbourhoods, particularly in the city region’s more deprived Create the Liverpool City Region Land areas Commission
LCR CA PRIORITY 6: A GREENER, CLEANER PLACE TO LIVE
Portfolio Energy and Renewables Portfolio Holder Cllr Rob Polhill
VISION STATEMENT
Our ambition:
We want to leave our environment in a better state than we found it, both locally in our different neighbourhoods and globally. We will respond to the emerging impacts brought by climate change to ensure that our communities and economy are resilient and have the infrastructure to meet the changing environment.
We will invest in sustainable transport, including though walking and cycling schemes, and will introduce further measures to improve air quality.
We have the ambition to be zero carbon by 2040. This involves substantial changes to our energy system, infrastructure and transport networks and building stock. This brings challenges and opportunities for our communities and businesses.
We will work to deliver a world-leading tidal energy system harnessing the power of the tides in the River Mersey and Liverpool Bay. The tidal project will become part of an integrated blue energy system.
We will work with partners to uplift energy efficiency in all homes across the city region. We will work to ensure that new buildings are zero-carbon enabled from inception.
As the transport sector begins the migration away from conventional internal combustion technology we will develop partnerships between the transport and energy sectors. This will ensure that alternatives such as electric or hydrogen power can be provided in a timely and cost-effective manner.
The LCR has significant green and blue environmental assets and these contribute to the quality of life for our residents. We will support the enhancement of these assets.
Page 29 LCR CA PRIORITY 6: A GREENER, CLEANER PLACE TO LIVE
The table highlights the key deliverables to be achieved
Objectives Headline actions 2018-20 1. Explore the potential for LCR to be zero carbon by 2040 focused on impacts from energy, Produce an LCR Energy Strategy and Action Plan transport, buildings and industry Develop the options and case for a Mersey Tidal 2. Look for opportunities to invest in sustainable energy systems to support our economy project and communities 3. Explore the potential for a major tidal energy scheme in the city region Produce a Hydrogen Plan for the City Region
4. Ensure energy system capacity is available ahead of need to meet the demands of a Deliver a North West Energy Hub with BEIS and NW growing economy Page 30 Page LEP partners in LCR 5. Develop partnerships between transport and energy service providers to enable further expansion of alternatively-fuelled road, rail and sea fleets Support a series of events across the city region as part of the 2019 Year of the Environment campaign 6. Position the city region in the minds of Government, regulators, companies and investors
as the principle centre in the UK for key low carbon technologies such as tidal, offshore Create energy and environment content to support wind and hydrogen the city region’s Local Industrial Strategy and Spatial 7. Develop strategies for smarter energy management across the built environment and Development Strategy lead by example in the public estate Develop investment propositions for energy and environment projects across the city region
Create an LCR climate change resilience plan
Contribute to the development of the air quality action plan
Support the development of the Northern Forest LCR CA PRIORITY 7: A WORLD CLASS CULTURE AND VISITOR EXPERIENCE
Portfolio Culture, Tourism and the Visitor Economy Portfolio Holder Mayor Joe Anderson OBE
VISION STATEMENT
Our ambition:
We want to take full advantage of the cultural assets of the city region and, recognising their importance, adopt strategies that will make them become even more successful in future.
We will use devolution to achieve sustained growth across key visitor markets, as well as ensuing that our culture and creativity are cornerstones of our place proposition.
In recognition of the potential impacts of the UK’s exit from the European Union, we will use our cultural assets to present ourselves as an open, global City Region which continues to welcome and value international visitors, businesses, workers and students.
And we are the first combined authority in the country to commit the equivalent of 1% of our funding to support cultural activities across the Liverpool City Region, through the 1% for Culture and Borough of Culture initiatives.
Page 31 LCR CA PRIORITY 7: A WORLD CLASS CULTURE AND VISITOR EXPERIENCE
The table highlights the key deliverables to be achieved Objectives Headline actions 2018-20 1. Increased participation in culture and creativity across the city region, through the Undertake research & cultural capital pipeline implementation of the City Region’s Cultural Strategy mapping and undertake research and mapping of city regions cultural and heritage 2. Increased understanding of the impact of culture and creativity across the LCR to support future assets advocacy and investment 3. Increased investment in capital infrastructure (attractions, accommodation, digital, transport Implementation of the City Region’s Cultural etc) that support the competitiveness of the City Region in attracting key domestic and and Creativity Strategy international visitor markets Continue to develop and deliver the cultural
Page 32 Page 4. Increased numbers of domestic and overseas leisure and business visitors staying in the City aspects of the devolution deal Region
5. Enhanced opportunities for career progression and increases in employee retention Support Liverpool UNESCO City of Music status and the music offer in the wider region 6. Exploit opportunities to establish the City Region as a Tourism Zone as part of the Government to increase economic and social benefits Modern Industry Strategy and the deal for the sector being brokered by Visit Britain
7. To work with national government on new ways of investing in the cultural and wider visitor Investment in capital infrastructure to attract economy to support excellence and growth domestic and international visitors including co-ordinated destination marketing
Implementation of the LCR Visitor Economy Strategy and Investment Plan
Establish the City Region as a Tourism Zone as part of the Government’s Industry Strategy
Ensure strategic linkages to support production of the Spatial Development Strategy LCR CA PRIORITY 8: MORE DECISIONS TAKEN LOCALLY
Portfolio Public Service Reform and Further Devolution Portfolio Holder Cllr Graham Morgan
VISION STATEMENT
Our ambition:
We want to make decisions locally on the issues that are important to us locally, rather than having them taken for us in Westminster.
We are proving, through our record of achievement so far, that devolution works for people and businesses in the city region and we will press for further powers and funding.
Working together across the six local authorities gives us a stronger voice and more power and we will look for further devolution where there is a clear benefit for our residents.
We will develop strong proposals for further devolution based on a place and evidence based approach to delivering both city region and national priorities. We will also look for opportunities to share best practice across the City Region.
We will be prepared for the challenges and opportunities presented to the City Region by the UK’s exit from the European Union, having worked with Government to develop a regional approach which works for our economy and our people.
We want our City Region’s public services to be designed and developed in an efficient way which can be clearly understood by members of the public.
Page 33
LCR CA PRIORITY 8: MORE DECISIONS TAKEN LOCALLY
The table highlights the key deliverables to be achieved
Objectives Headline actions 2018-20 1. Negotiate with Government to deliver on their Budget Open discussions with Government about the potential for further devolution and commitment to further devolution in support of our city place based approaches including on education, skills and apprenticeships region’s objectives Explore the potential for more efficient public services 2. Deliver the devolution already devolved from Government Seek opportunities to promote ‘Northshoring’ of civil service posts to the City
Page 34 Page 3. Greater local control over how money is raised and Region spent locally Ensure delivery of existing devolution commitments and develop a strong track 4. More accountability and transparency in decision making record of the Combined Authority’s record on delivery for residents
Manage a Rural Leader funding programme to support rural diversification and growth
Be an Intermediate Body for European grant funding, including ESIF, SUD, ERDF and ESF projects
Ensure that the City Region has a voice in the development of the UK’s approach to exiting the European Union, and that we benefit from any policy apparatus designed to address the opportunities and challenges this may present
Agenda Item 6
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE MANAGING DIRECTOR OF THE LCR LEP
‘STRENGTHENING LOCAL ENTERPRISE PARTNERSHIPS’ A MINISTERIAL REVIEW OF LOCAL ENTERPRISE PARTNERSHIPS (LEPs)
1. PURPOSE OF REPORT
1.1 This report advises the Members of the Liverpool City Region Combined Authority on the requirements of the recently published review of LEPs by Government Ministers, the implications for the Liverpool City Region LEP and Combined Authority (CA) and the steps being taken to address these.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority:
(a) Note the contents of the report and the approach adopted; (b) Delegate authority to the CA Chief Executive to agree with the LEP the response to Government on the LEP where it pertains to the CA.
3. BACKGROUND
3.1 A Ministerial review of LEPs was published on 24 July entitled ’Strengthening Local Enterprise Partnerships’ as a consequence of the Ney Review. The Ministers represented the Ministry of Housing, Communities and Local Government; the Department for Business, Energy and Industrial Strategy and Her Majesty’s Treasury. They convened an advisory panel of experts from LEPs, business, local authorities and business representative organisations to obtain an overview of both issues and practice.
3.2 Whilst the Ministerial Review (‘the Review’) addresses the findings of the Ney Review and the concerns of the Public Accounts Committee, its purpose was also to ensure that LEPs would be fit for purpose in developing Local
Page 35 Industrial Strategies (LIS). The White Paper on Industrial Strategy set out this commitment.
3.3 The review focused on specific aspects, as follows;
a. Role and responsibilities of LEPs and in particular, with regard to LIS; b. Leadership and organisational capacity; c. Accountability and performance; d. Geography; and e. Mayoral Combined Authorities
3.4 A number of conclusions were defined in each of the areas named at 3.3 and, this in effect provides a core framework to which every LEP should adhere. Government has committed to support LEPs to effect change, where necessary, and will test compliance as part of its routine performance monitoring.
3.5 The review aims to introduce and implement greater clarity of the roles and responsibilities of LEPs. In the case of Liverpool City Region, this needs to be articulated in the context of operating alongside a mayoral combined authority. LEPs have evolved according to local need and in line with the localism agenda but this was largely before the creation of combined authorities.
3.6 Government requires LEPs (and where appropriate in agreement with the relevant combined authority) to respond on how they will satisfy government requirements in each of the areas described at 3.3. The manner of response is through a template return which has been provided by Government.
3.7 There are two deadlines for responses. A response on 3d ‘Geography’ had a submission deadline of 28 September. This area of review was to address areas where LEPs overlapped local authority boundaries and in particular where coterminous boundaries between LEP and combined authority did not exist. As the LCR boundaries of the LEP and CA are coterminous there are no presently no changes planned and the response submitted confirmed this.
3.8 The main response, dealing with areas specified at 3 a., b., c. and e is required by 31 October. The responses are a statement of intent on how the review findings and recommendations will be satisfied.
3.9 The LEP must demonstrate compliance on or before 1 April 2019. The specific outputs that need to be developed and jointly owned by the LEP and LCR CA are;
a. Publish an agreement which sets out the respective roles and responsibilities of LEP and CA providing sufficient clarity on accountability for public funding in a single document including relevant assurance frameworks for LEP and CA.
b. Produce an annual LEP delivery plan and publish it by April 2019
Page 36 c. Produce an end of year report with the first being for 2019-20 financial year.
3.10 To aid the annual delivery plan and end of year report Government will work with LEPs to develop qualitative and quantitative measures to report against. As Local Industrial Strategies (LIS) are developed, Government expects the delivery plan and end of year report to be linked to the progress of the Local Industrial Strategy. The implementation response should provide a commitment to adopt and report against agreed key performance indicators, although these are yet to be defined.
3.11 Given that Government requires LEPs to account for capital funds such as Local Growth Funds (LGF) which are invested through the SIF and to support the CA in development of LIS, the delivery plan and annual report will need to be produced and jointly owned by both the LEP and CA.
3.12 Government also requires LEPs to be clearly separated from membership models to demonstate that they act completely impartially of funding sources and in the interests of all businesses. The response to the Review will set out how this will be achieved.
4. LCR APPROACH
4.1 Since its formation, the LEP has fostered a strong relationship with the constituent Local Authorities and now the Combined Authority. These relationships operate at both individual and institutional levels with executive teams aligning and sharing resources as appropriate. The review requires the LEP and CA to establish a clear and succinct agreement setting out lines of accountability and responsibility for decision making in one place.
4.2 The formal agreement, referenced at 3.9 a., will address this and requires the LEP and CA to jointly own it. Therefore the response to the LEP Review should represent the views of both entities.
4.3 To progress development of the response to government and the underlying implementation plan, a joint working group was formed between the senior executives of the LEP and CA. In addition, a Chief Executive representative of the constituent Local Authorities is also engaged in the process and a sub- group of the LEP Board has formed to provide oversight and guidance to the working group through the LEP Executive.
4.4 Whilst ensuing that LCR achieves a model that complies with Government policy and ensures that access to funding is not compromised, it is equally important that the model works in the best interests of the City Region and continues to deliver positive economic impact through active engagement of business, education and the third sector. This has been embraced by the working group in developing the response to Government.
Page 37 4.5 The working group will also continue to progress implementation after the response is submitted to Government to ensure it works in the best interests of the City Region. This work will acknowledge other local initiatives and policies that operate at city-region scale.
5. OVER-ARCHING PRINCIPLES
5.1 Government has acknowledged the excellent working relationship between the LEP and CA and alongside Manchester is regarded as one of the foremost in the country. Such confidence in this relationship provides reassurance to Government and as such, it is intended to maintain the best aspects of the current model and only make changes that ensure compliance or improve performance. Both the LEP and CA are committed to further strengthening these relationships at executive level as well as governance.
5.2 A key requirement of the LEP Review is that all LEPs must assume a legal personality, although the form of this is not prescribed. There is an important caveat to this that allows LEPs located in Combined Authority areas to assume the legal personality of the CA. In effect, this means that the use funds awarded to the LEP would be determined by the LEP but the disbursement of them would be administered by the CA’s executive.
5.3 The LCR has already informally adopted this model with such as LGF being administered through the SIF. Besides the benefits of aligning investment this also avoids the duplication of executive functions such as programme management, investment appraisal and monitoring and evaluation. It is intended to build on this approach.
5.4 Whilst adopting the legal personality of the CA, the LEP Review also requires LEPs to maintain their independence. In effect this means that the formal agreement between the LEP and CA will record which decisions the LEP will reserve for itself, over funds awarded to it, and those it delegates to the CA or others. Even where decisions are delegated by the LEP, the accountability to Government for the funds remain with the LEP and the local Assurance Frameworks will need to capture this distinction.
5.5 LEP independence is not restricted to decision making but includes self- determination on where the LEP will receive intelligence and advice and also controlling its agenda and programme of work. Presently this is achieved through the direct support of a separate standalone legal delivery entity (LEPCo) that employs staff, enters contracts and receives financial backing from public and private sector partners.
5.6 In order to demonstrate a clear separation between the LEP in its strategic advisory capacity and delivery activity to grow the economy, and to fulfil the Review requirement set out in 3.12, it is proposed to formalise and strengthen this separation between strategy and delivery.
Page 38 5.7 This approach has been informally tested with Government, as to its compliance and their expectations on how a LEP in a CA area should operate. It has received an encouraging response, subject to formal submission and to Ministerial approval.
6. RESOURCE IMPLICATIONS
6.1 Immediate resource implications are restricted to the time of the CA Officers engaged in the Working Group. Other resource implications may emerge as a result of the implementation work, but these would either be brought back to the Combined Authority or reported under delegated authority.
7. RISKS AND MITIGATION
7.1 The development of the underlying implementation plan will include a risk and issues log. However, the key risk at this point is a failure to either respond or respond in a manner that does not confirm that the requirements of the LEP Review will be met and within the prescribed timescales.
7.2 This key risk is deemed unlikely to be realised but its impact would be significant as Government have already indicated it would lead to a cessation of funding, even where already agreed or awarded but not drawn down or committed. This would not only prevent ongoing and future capital investment but also the cessation of some business support programmes operated through the LCR LEP Growth Hub.
8. EQUALITY AND DIVERSITY IMPLICATIONS
8.1 Whilst the focus of the LEP Review is on regularising and formalising the role of LEPs, particularly in Combined Authority areas, the spirit of the review is to improve governance and transparency of funds awarded through LEPs but also that LEPs have visibility and opportunity to challenge other funds invested to drive economic growth.
8.2 LEPs are being encouraged to ensure their Boards address equality and diversity representation that is reflective of their areas. In LCR’s case, the LEP also intends this to apply to the various sub-boards that it has developed.
9. COMMUNICATION ISSUES
9.1 As stated earlier, the outcome should be an enhanced system of governance that is more transparent and clear and understandable. However, the variety of stakeholders, which includes the public will have different levels of knowledge and understanding and a communications plan will be developed to explain this so that a consistent and uniform level of understanding is achieved.
Page 39
10. CONCLUSION
10.1 The LEP Review confirms the importance of LEPs in Government policy and the changes that are advocated are intended to strengthen their role and independence. The LCR has achieved a successful balance in roles and responsibilities but these to date have not been formalised which the LEP Review now requires. As such the LEP Review represent less of a challenge but more an opportunity and catalyst for formalisation and regularisation of relationships and within a specified timescale. It is previously stated that Government recognise the excellent working relationships between the LEP and CA, both at governance and executive levels. This provides them with confidence in LCR’s ability to meet their expectations and deliver on behalf of their community.
MARK BASNETT Managing Director of the LCR Local Enterprise Partnership
Contact Officer(s):
Appendices: Appendix One – LEP Review ‘Strengthened Local Enterprise Partnerships’
Page 40
Strengthened Local Enterprise Partnerships
July 2018 Ministry of Housing, Communities and Local Government Page 41
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July 2018
ISBN: 978-1-4098-5305-3
Page 42
Contents
Executive summary 4
Introduction 9
Approach to the review 11
Role and responsibilities 12
Leadership and organisational capacity 15
Accountability and performance 19
Geography 22
Mayoral combined authorities 24
Managing the transition to strengthened Local Enterprise Partnerships 27
Annex – Advisory Panel Joint Statement 28
Page 43 3
Executive summary
Since their establishment in 2010, Local Enterprise Partnerships have been integral to economic growth across England. Following the publication of our modern Industrial Strategy, that sets out an approach to ensuring prosperous communities throughout the country, we have reviewed our policy towards Local Enterprise Partnerships to ensure that they continue to support Government in meeting this ambition.
In the Industrial Strategy, Government committed to work with Local Enterprise Partnerships to bring forward reforms to leadership, governance, accountability, financial reporting and geographical boundaries. It is critical that Local Enterprise Partnerships are independent and private sector led partnerships that are accountable to the communities they support. At the same time, it is important to set out a model that will underpin future national and local collaboration. This will be essential to the development of Local Industrial Strategies and in the context of the future UK Shared Prosperity Fund.
This document sets out the conclusions of our policy review. It includes a series of Government commitments alongside a number of additional changes that Government will work with Local Enterprise Partnerships to implement.
Role and responsibilities:
Over recent years Local Enterprise Partnerships have played a key role in convening local economic stakeholders to develop evidence-based economic strategies. They have helped to identify key investment opportunities and interventions with the potential to increase growth in towns, cities and rural areas across the country. Local Enterprise Partnership Chairs have also acted as authoritative advocates for their local economy.
Government will: o Publish a statement on the role and responsibilities of Local Enterprise Partnerships. Local Enterprise Partnerships will focus on enhancing productivity. This will be achieved through the development and delivery of their Local Industrial Strategy. o Publish a further statement on Local Industrial Strategies to guide locally-led work. This statement will be published over the summer. Government will aim to agree Local Industrial Strategies with all areas of England by early 2020. o Commission an annual economic outlook to independently measure economic performance across all Local Enterprise Partnerships and the areas they cover.
Government will support all Local Enterprise Partnerships to: o Develop an evidence-based Local Industrial Strategy that sets out a long-term economic vision for their area based on local consultation. o Publish an annual delivery plan and end of year report. This will include key performance indicators to assess the impact of their Local Industrial Strategy, funding and interventions. It will inform objective assessment on Local Enterprise Partnership performance both nationally and locally.
Page 44 4
Leadership and organisational capacity:
Successful Local Enterprise Partnerships are led by influential private and public sector leaders, acting as champions for their area’s economic success. Since their formation Local Enterprise Partnerships across the country have benefitted from business expertise and acumen. They have created new partnerships between the public and private sector across administrative geographies that represent the diversity of local businesses and communities.
Local Enterprise Partnerships prioritise policies and actions on the basis of clear economic evidence and intelligence from businesses and local communities. Their interventions are designed to improve productivity across the local economy to benefit people and communities with the aim of creating more inclusive economies. To do this effectively Local Enterprise Partnerships must have robust governance arrangements that provide the operational independence to take tough decisions and hold local partners to account for delivery. This also requires Local Enterprise Partnerships to have the organisational capacity to fulfil their roles and responsibilities. They must have the means to prioritise policies and actions, and to commission providers in the public, private sector and voluntary and community sector to deliver programmes.
Government will: o Increase regular dialogue with Local Enterprise Partnerships. This includes the Prime Minister chaired Council announced in the Industrial Strategy, as well as a senior official sponsor for every Local Enterprise Partnership from across government departments. o Actively work with Local Enterprise Partnerships to advertise opportunities for private sector leaders to become a Local Enterprise Partnership Chair when vacancies emerge. While these are not public appointments, we will offer to list vacancies on the Centre for Public Appointments website. o Offer an induction and training programme for Local Enterprise Partnership board members and officers on working with Government. We will work with the LEP Network, Local Government Association and other professional development bodies to develop this programme. o Provide up to £20 million between 2018-19 and 2019-20 in additional capacity funding to support Local Enterprise Partnerships to implement the review and to provide the strategic and analytical capability needed to develop ambitious Local Industrial Strategies.
Government will support Local Enterprise Partnerships to: o Consult widely and transparently with the business community before appointing a new Chair; and introduce defined term limits for Chairs and Deputy Chairs in line with best practice in the private sector. o Establish more representative boards of a maximum of 20 persons with the option to co-opt up to five additional board members. Our aspiration is that two- thirds of board members should be from the private sector; o Improve the gender balance and representation of those with protected characteristics on boards with an aim that women make up at least one third of Local Enterprise Partnership boards by 2020 with an expectation for equal representation by 2023, and ensuring all Local Enterprise Partnership boards are representative of the businesses and communities they serve.
Page 45 5
o Provide a secretariat independent of local government to support the Chair and board in decision making. o Develop a strong local evidence base of economic strengths, weaknesses and comparative advantages within a national and international context. This will be supported by robust evaluation of individual projects and interventions.
Accountability and performance:
Local Enterprise Partnerships already recognise that they must operate to the highest standards of accountability and transparency in the use of public funding. Government has strengthened its approach to assurance processes for the Local Growth Fund. Additional guidance has also been provided to Local Enterprise Partnerships on transparency.
We want to build on that progress and go further. We will clarify Government’s approach to robust monitoring and intervention. This will be based on a standardised national framework that ensures Local Enterprise Partnerships remain autonomous and independent bodies with local decision making powers. Sitting alongside this, the Government will agree with the LEP Network how it will support Local Enterprise Partnerships to share best practice, undertake peer-review and work together as a sector to embed a culture of good governance and self-regulation.
Local Enterprise Partnerships operate on organisational structures that support local decision making and provide greater assurance over the management of public funding. These structures should enable clear lines of accountability for delivery with local partners, as well as democratic, public and business scrutiny of decision making.
Government will: o Continue to maintain overall accountability for the system of Local Enterprise Partnerships and local growth funding, and implement in full the recommendations of the Ney Review and any future recommendations that may be made as the performance of Local Enterprise Partnerships is scrutinised and reviewed. o Assess and publish annual performance against quantitative and qualitative measures set out within Local Enterprise Partnership delivery plans. o Set out within a revised National Assurance Framework a clear statement on an escalating approach to intervention in any instances where Local Enterprise Partnerships demonstrate that they are found to be underperforming. o Develop with the LEP Network and Local Enterprise Partnerships a sector-led approach to assessing and improving performance through regular peer review.
Government will support all Local Enterprise Partnerships to: o Have a legal personality, such as incorporation as companies, or mayoral combined authorities or combined authorities where they exist. o Set out clearly and transparently the responsibilities of the Chair, Board, Director, and Accountable Body, including over spending decisions, appointments, and governance. o Actively participate in relevant local authority scrutiny panel enquiries to ensure effective and appropriate democratic scrutiny of their investment decisions. o Hold annual general meetings open to the public to attend to ensure the communities that they represent can understand and influence the economic plans for the area.
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Geography:
One of the great strengths of Local Enterprise Partnerships is their ability to bring together business and civic leaders across local administrative boundaries and provide strategic direction for a functional economic area. This will remain central to the success of Local Enterprise Partnerships; however, it is right to review the current geographic boundaries to ensure that they are fit for purpose for the expanded role we are proposing here.
Overlapping geographies emerged when Local Enterprise Partnerships were first formed on a voluntary basis. Since 2011, however, the context in which Local Enterprise Partnerships operate has altered significantly. They now oversee significant amounts of public funding and have an authoritative voice in shaping national and local policy. It is important that accountability for decisions and responsibility for investment is clear. On balance, Government considers that retaining overlaps dilutes accountability and responsibility for setting strategies for places and so will seek to ensure that all businesses and communities are represented by one Local Enterprise Partnership. Close collaboration between Local Enterprise Partnerships will replace overlapping responsibilities. In looking to remove overlaps, we will also need to ensure that Local Enterprise Partnerships are operating over a significant enough scale to provide the strategic direction and efficient delivery of future programmes.
Government will: o Ask Local Enterprise Partnership Chairs and other local stakeholders to come forward with considered proposals by the end of September on geographies which best reflect real functional economic areas, remove overlaps and, where appropriate, propose wider changes such as mergers. Government will respond to these proposals in the autumn and future capacity funding will be contingent on successfully achieving this.
Government will support all Local Enterprise Partnerships to: o Collaborate across boundaries where interests are aligned when developing strategies and interventions to maximise their impact across their different objectives.
Mayoral combined authorities:
Government has supported local partners to establish mayoral combined authorities as democratically accountable bodies focused on driving growth. Part of the case for establishing these bodies over specific geographies is that these are functional economic areas that are conducive towards the development of strategy, policy and interventions. Government remains open to conversations with other local areas that wish to explore the potential for devolution, where clear local support and a strong economic case for doing so can be demonstrated.
Greater alignment and collaboration between mayoral combined authorities and Local Enterprise Partnerships is administratively efficient and leads to a greater economic impact, whilst still retaining private sector acumen in decision making. The precise nature of the relationship between these two institutions, however, will need to take account of the governance arrangements established for each area.
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Government will: o Consolidate its engagement with mayoral combined authorities and their Local Enterprise Partnerships with a collaborative approach to agreeing a Local Industrial Strategy.
In mayoral combined authority areas, we will work with each Local Enterprise Partnership and mayoral combined authority to: o Ensure Local Enterprise Partnerships have a distinctive role in setting strategy and commissioning interventions to drive growth, jobs and private sector investment. o Require Local Enterprise Partnerships and mayoral combined authorities to develop local agreements which clearly set out roles and responsibilities and accountability. o Encourage Local Enterprise Partnerships and mayoral combined authorities to move towards coterminous geographies where appropriate in line with the wider discussions on Local Enterprise Partnership geographies.
The subsequent chapters of this paper provide detail on next steps and further detail on the reforms we will ask of Local Enterprise Partnerships in each of these areas. Local Enterprise Partnerships will need to clearly set out how they will adopt these changes. As referred to above, we will provide up to £20 million of additional funding between 2018-19 and 2019-20 to support the implementation of these changes and embed evidence in Local Industrial Strategies.
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Introduction
The Industrial Strategy sets an ambitious, long-term vision to make Britain the world’s most innovative economy, with good jobs and greater earning power for all. Every region in the UK has a role to play in boosting the national economy, driven by local leadership and ambitious visions for the future. We want to have prosperous communities throughout the country and strengthened Local Enterprise Partnerships will help deliver this vision in England.
Evolution of Local Enterprise Partnerships
Local Enterprise Partnerships are private sector led partnerships between businesses and local public sector bodies. They were announced in 2010 to bring private sector expertise into local economic decision making and to encourage collaboration and strategic decision making at a functional economic area. This was part of Government’s ambition to shift power away from central government to local communities, citizens and independent providers, as set out in the Local Growth White Paper 2010.
Following the 2013 Spending Review Local Enterprise Partnerships acquired considerable new levers over growth – particularly funding to deliver the interventions that stimulate growth. Through three rounds of Growth Deals the Government is giving over £9 billion to help Local Enterprise Partnerships to deliver their investment priorities. Local Enterprise Partnerships also perform a strategic oversight function for EU Structural and Investment Funds.
Local Enterprise Partnerships have increased private sector involvement in economic decision making, encouraged greater collaboration between public sector leaders across administrative boundaries, and ensured that effective investments are made across areas in growth priority projects.
While Local Enterprise Partnerships have played an important role in supporting local growth, we know that performance has varied. Last year, Mary Ney (Ministry of Housing, Communities and Local Government Non-Executive Director) led a review into Local Enterprise Partnership governance and transparency. Government accepted all the review recommendations and made compliance with these a condition of funding for 2018 - 19. The Government has subsequently accepted in full the recommendations of the recent Public Accounts Committee report on Governance and departmental oversight of the Greater Cambridge Greater Peterborough Local Enterprise Partnership.
Reformed Local Enterprise Partnerships and the Industrial Strategy
The Industrial Strategy (published in November 2017) confirmed that the Government remained firmly committed to Local Enterprise Partnerships. As part of this commitment the Prime Minister agreed to chair a biannual ‘Council of Local Enterprise Partnership Chairs’. This will provide an opportunity for Local Enterprise Partnership leaders to inform national policy decisions. The first of these meetings took place on 19th June 2018.
The Industrial Strategy stated that Government would work to strengthen Local Enterprise Partnerships to ensure that all parts of England stand ready to play their part in the growth of our economy after our exit from the European Union. The Government confirmed a
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review of Local Enterprise Partnerships to deliver this objective, so that they are securely placed to drive growth through the development of the Local Industrial Strategies in partnership with areas, harnessing distinctive strengths to meet the Government’s Grand Challenges and in the context of the UK Shared Prosperity Fund.
This document marks the conclusion of the Ministerial review of Local Enterprise Partnerships and sets out Government’s expectations of their roles and responsibilities. Government will support Local Enterprise Partnerships to meet this level of ambition by working with them to strengthen leadership and capability, improve accountability and manage risk, and provide clarity on geography.
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Approach to the review
In November 2017 the Industrial Strategy announced a review into the roles and responsibilities of Local Enterprise Partnerships that set out to identify reforms to leadership, governance, accountability, financial reporting and geographical boundaries.
Ministers in the Ministry of Housing, Communities and Local Government; the Department for Business, Energy and Industrial Strategy; and Her Majesty’s Treasury convened an advisory panel, comprised of experts from Local Enterprise Partnerships, business, local authorities and business representative organisations in order to obtain an overview of both issues and practice. The panel met four times in December, January, March and May and has agreed the joint statement included as an annex below.
Government has worked with the LEP Network and received submissions from them and other organisations to inform the development of these reforms. In addition, through the annual performance review process we have held discussions with each Local Enterprise Partnership on their growth ambitions and challenges. Government has also carried out a series of in-depth deep dives into Local Enterprise Partnerships’ governance, accountability and transparency to help to identify best practice.
Government will implement the commitments set out in this document and will work with Local Enterprise Partnerships to take forward all the recommended actions we have set out in preparation for Local Industrial Strategies across England and in the context of the UK Shared Prosperity Fund.
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Role and responsibilities
Cities, towns and rural areas across England face a range of economic opportunities and challenges. Over recent years, Local Enterprise Partnerships have assessed these local needs and tailored economic policy responses accordingly. They must continue to carry out this critical role.
The case for change:
Local Enterprise Partnerships were initially established to “provide the clear vision and strategic leadership to drive sustainable private sector-led growth and job creation in their area.”[1] Their roles and responsibilities were relatively unspecified in order to allow for arrangements reflecting different circumstances across the country. They replaced the former Regional Development Agencies which delivered poor value for money; covering sprawling government office regions, the Regional Development Agencies were distant and remote from local business, and the arbitrary regions had no connection with natural economic areas.
This approach has led to significant local innovation. However, we think there is more opportunity to share best practice across the country and provide clarity on where Local Enterprise Partnerships should focus activity. By being clearer on roles and responsibilities we intend to set out a well understood model that allows Local Enterprise Partnerships to make the most effective use of available resources and funding.
Evidence also suggests that the best economic strategies integrate all influential economic players into decision-making.[2] Successful economies require more than a single institutional or leadership model – they are dependent upon strong networks and sustained partnerships.
Private sector leadership remains integral to the Local Enterprise Partnership model. Businesses provide essential market intelligence to inform local decision making. Councils are also critical. They provide political accountability and community knowledge. They support business growth through their statutory functions, investment in economic infrastructure, and wider role in creating quality places. Successful Local Enterprise Partnerships have also worked closely with universities, business representative organisations, further education colleges, the voluntary sector, and other key economic and community stakeholders. It is Government’s expectation that Local Enterprise Partnerships continue this collaboration in order to draw on the best local knowledge and insight.
In line with the Industrial Strategy, we will set all Local Enterprise Partnerships a single mission to deliver Local Industrial Strategies to promote productivity. This should include a focus on the foundations of productivity and identify priorities across Ideas, People, Infrastructure, Business Environment and Places. In certain parts of the country this may
[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/32076/cm 7961-local-growth-white-paper.pdf [2] https://www.gov.uk/government/publications/future-cities-comparative-urban-governance
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involve an emphasis on skills whilst in others it may be land supply, congestion or working with relevant local authorities in the delivery of housing where it is a barrier to growth. In others, it may involve harnessing distinctive strengths to meet the Government’s Grand Challenges. And for others, it may involve identifying weaknesses in productivity across their local areas or communities and promoting inclusive growth by using existing national and local funding, such as in isolated rural or urban communities. This focus will ensure the benefits of growth are realised by all and that there are the right conditions for prosperous communities in an area.
Local Enterprise Partnerships will support the supply of skills to an area as they respond to the Skills Advisory Panels programme, and will develop even stronger local labour markets and skills governance through Skills Advisory Panels (these will, where possible, use existing infrastructure). These boards will convene local employers, learning providers and other partners, to achieve a better alignment of the local employment and skills offer. This analysis will feed into the development of Local Industrial Strategies.
How Government will support this change:
We have reviewed our previous statement on the responsibilities of Local Enterprise Partnerships. Whilst Local Enterprise Partnerships will determine their own specific priorities, we are clear that they should focus their activities on the following four activities to support the development and delivery of their Local Industrial Strategy:
Strategy: Developing an evidence-based Local Industrial Strategy that identifies local strengths and challenges, future opportunities and the action needed to boost productivity, earning power and competitiveness across their area. Allocation of funds: Identifying and developing investment opportunities; prioritising the award of local growth funding; and monitoring and evaluating the impacts of its activities to improve productivity across the local economy. Co-ordination: Using their convening power, for example to co-ordinate responses to economic shocks; and bringing together partners from the private, public and third sectors. Advocacy: Collaborating with a wide-range of local partners to act as an informed and independent voice for their area.
We will publish a further statement on Local Industrial Strategies to inform locally-led development across the country. This will set out how Local Enterprise Partnerships will identify priorities across the foundations of productivity. As set out in the Industrial Strategy, Government intends to discuss the operation of Local Industrial Strategies in the devolved nations with the relevant devolved administration and other stakeholders.
In addition, Government will commission an annual economic outlook to measure and publish economic performance across all Local Enterprise Partnerships and benchmark performance of individual Local Enterprise Partnerships. We will work with academics, and think tanks and the LEP Network to further develop the scope of this work.
How Local Enterprise Partnerships will support this change:
Government will work with Local Enterprise Partnerships to develop Local Industrial Strategies. These will set out a collective and shared strategic course for the long-
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term. The first Local Industrial Strategies will be agreed with Government by March 2019. We will adopt a phased approach to working with places. We aim to agree Local Industrial Strategies across England by early 2020.
Building on the work already being developed across the country, all places should continue locally-led work in a range of areas, including: ensuring priorities are based on objective evidence, engaging with local stakeholders to build a focused set of priorities; and ensuring local ambitions are aligned to the national Industrial Strategy.
In addition, we expect all Local Enterprise Partnerships will follow best practice within the sector and produce an annual delivery plan and end of year report. These will be published and shared with Government and will include a set of headline outcome indicators based on local priorities to benefit people and communities, and a detailed and well developed understanding of the local economic evidence base across their area. These documents will inform objective assessments of Local Enterprise Partnership performance both nationally and locally. Local Enterprise Partnerships will need to work closely with key delivery partners, notably councils, to determine and agree the economic development priorities, interventions and funding that will be set out in their delivery plans.
We expect that these delivery plans would include how Local Enterprise Partnerships are investing existing Local Growth Fund awards, and delivering other local growth programmes such as Enterprise Zones and Growth Hubs. We will also expect that these delivery plans would include detail on how Local Enterprise Partnerships will work with local authorities to make the most of their existing levers to drive economic growth and ensure that the planning system is responsive to commercial development. They would also include details on the allocation of any other national and local funds, alongside approaches to monitoring and evaluation, and how the Local Enterprise Partnership plans for consultation and engagement with public, private and voluntary and community based bodies. Government will work with Local Enterprise Partnerships to develop a consistent approach to delivery plans that recognises different local priorities. These will be ready for April 2019.
The revised Local Enterprise Partnership Assurance Framework, to be published in early Autumn 2018, will provide further clarity on the development of Local Enterprise Partnership delivery plans.
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Leadership and organisational capacity
The leadership that Chairs have provided has been central to Local Enterprise Partnerships’ success. In the Industrial Strategy, Government set out a commitment to ensure that all Local Enterprise Partnerships are driven by influential local leaders, acting as champions for their area’s economic success. Local Enterprise Partnerships provide a platform for businesses, local elected leaders, universities, skills providers and voluntary and community sector organisations to shape policies for their area, bringing in business expertise and acumen, as well as forming new partnerships between the public and private sector across existing administrative geographies.
Local Enterprise Partnerships must have the operational independence and organisational capacity to deliver on the roles and responsibilities set out in this document. They must have the means to prioritise policies and actions, and to commission providers in the public, private and voluntary sectors to deliver programmes. Local Enterprise Partnership board members should be provided with adequate support, coupled with proportionate governance requirements, to enable them to perform their role effectively.
The case for change:
The intention has always been that Local Enterprise Partnerships should be led by Chairs who are visible, active participants in the business community, supported by boards with a strong business and community voice.
Chairs must have a strong private sector background and experience of building effective organisations to ensure they are equipped with the skills needed to steer the work of a Local Enterprise Partnership. Chairs must be able to work collaboratively with a range of stakeholders, including local people, businesses and their representatives, elected officials, education institutions and voluntary and community sector bodies, holding stakeholders to account for delivery and ensuring tough decisions are taken. They must also act as an advocate for the place and be able to represent the concerns of its people, institutions and businesses, both locally and at the highest levels of Government.
As the role of Local Enterprise Partnerships evolves, it is increasingly important for Chairs to be strategic operators – able to interpret the external environment, articulate the Local Enterprise Partnership’s position within it and amplify the board’s stated ambitions. As Local Enterprise Partnerships invest significant amounts of public money, it is critical that Chairs have an eye on the detail and ensure that the correct processes are in place to provide assurance on both how funding is allocated and how it is managed. The support that they receive to carry out this greater strategic function must also be strengthened, including through the appointment of a Deputy Chair for each Local Enterprise Partnership.
The Industrial Strategy highlighted the role for communities in driving productivity across the country; Local Enterprise Partnerships must therefore be accountable to their area and representative of the communities they serve. We need to do more to improve the diversity of Local Enterprise Partnership Chairs and board members, both in terms of protected characteristics and also in drawing from a more diverse representation of sectors and all parts of their geography, with representation from more entrepreneurial and growing start-
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ups and from the voluntary and community sector bodies who will often work with and deliver services on behalf of the most vulnerable in society.
As Local Enterprise Partnerships represent a broad coalition of interests and are responsible for allocating public funding, it is essential that recruitment exercises for Chair and board vacancies operate on the basis of merit, fairness and openness in line with the Nolan Principles. There must be consistent and publicly-outlined processes to enable effective recruitment of people who can bring new ideas and approaches, and help increase board diversity. Reflecting their broader role in promoting the development of prosperous communities, Local Enterprise Partnerships should look for board members who bring a range of expertise to their role, as the best do at present, for example business leaders who are also charity trustees, school governors or who lead social enterprises as well.
With a new enhanced role for Local Enterprise Partnerships, it is important these leaders possess the necessary skills and that their organisations have the capability to deliver on the fundamental task of generating local economic growth. This should include the ability to effectively gather and analyse evidence around the economic strengths, weaknesses and barriers to growth of the area; identify the priority areas for investment; and develop an investment plan to secure the necessary funding to take this work forward. To ensure effective and efficient focus on the priorities for local economic growth and to deliver impact, there should be robust monitoring and evaluation of programmes which is used to inform decisions around awarding, continuing or withdrawing funding.
How Government will support this change:
There will be an increase in regular Government dialogue with Local Enterprise Partnerships, to reflect their strengthened role. This includes the Prime Minister-chaired ‘Council of Local Enterprise Partnership Chairs’, which was announced in the Industrial Strategy. This will allow Chairs to identify key areas for action, inform national policy, and enable closer cooperation with Government on delivering the Industrial Strategy objectives. To complement this, each Local Enterprise Partnership will be supported by a senior official sponsor from across Whitehall, to provide additional guidance on working with Government.
Government will actively work with Local Enterprise Partnerships to advertise opportunities for private sector leaders to become a Local Enterprise Partnership Chair when vacancies emerge. While these are not public appointments, we will offer to list vacancies on the Centre for Public Appointments website. This will help open up recruitment exercises to a broader pool of potential candidates, and at the same time underline the importance of the role to helping shape and deliver Government policy.
Some Local Enterprise Partnerships have proactively sourced formal support to build the capability of newly recruited board members. Government will build on this good practice and introduce an induction and training programme for Local Enterprise Partnership board members and officers, to ensure board members are adequately supported to provide challenge and direction to their Local Enterprise Partnership and understand how best to work with Government. We will work with the LEP Network, Local Government Association and other professional development bodies to develop this programme.
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To understand what support Local Enterprise Partnerships will need to implement these changes we will commission an independent benchmarking of the capacity and capability of all Local Enterprise Partnerships against best practice, so that performance requirements match resources available. In addition, we are providing additional capacity funding in 2018 for each Local Enterprise Partnership that clearly sets out how they will adopt these changes and are ready to develop Local Industrial Strategies. This funding will also help to strengthen Local Enterprise Partnerships’ ability to more actively involve local communities and organisations in their activity. We will ask Local Enterprise Partnerships to develop an implementation plan before they receive their allocation of this funding.
How Local Enterprise Partnerships will support this change:
Government expects that each Local Enterprise Partnership consults widely and transparently with the business community before appointing a new Chair, and appoints a Deputy Chair. This process, including members of the appointment panel, should be set out by the Local Enterprise Partnership in their local assurance framework. Government will support this by advertising vacancies and actively supporting recruitment into these roles but appointment to positions on Local Enterprise Partnership boards will remain a decision for the Partnership. In line with best practice in the private sector, Local Enterprise Partnerships will want to introduce defined term limits for Chairs and Deputy Chairs where these are not currently in place.
Businesses pay the taxes, create the jobs and provide the economic growth that will deliver the ultimate outcomes of the Industrial Strategy: higher living standards and higher levels of productivity. Government’s aspiration is that Local Enterprise Partnerships work towards strengthening the representation from the private sector, increasing representatives from the private sector so that they form at least two thirds of the board, to ensure that each Local Enterprise Partnership can truly be said to be business- led. In order to maintain focused board direction and input, Government will work with Local Enterprise Partnerships to establish a maximum permanent board of 20 people, with the option to co-opt an additional five board members with specialist knowledge on a one year basis.1
The composition of Local Enterprise Partnership boards is an important ingredient in their success. These boards must be able to take into consideration a breadth of interests of different local leaders and stakeholder groups to ensure that their growth strategies are relevant, representative and widely supported across their area. We want to ensure all Local Enterprise Partnership boards are truly representative of the communities that they serve. Government expects refreshed Local Enterprise Partnership boards to improve their gender balance and representation of those with protected characteristics. Our aim is for Local Enterprise Partnership boards to have equal representation of men and women by 2023. As a step towards achieving this, we will replicate the target set in the
1 Any private sector board member must fit the definition of ‘private sector’ as defined by the National Accounts Sector Classification. A private sector member must be or have been employed by an organisation not included as central government, local government or a public corporation as defined for the UK National Accounts.
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Hampton-Alexander Review for FTSE 350 boards; Local Enterprise Partnerships should aim for a minimum of a third women’s representation on their boards by 2020.2
It is vital to ensure that local leadership has access to the advice and information they need to make informed and impactful decisions. Whilst local government representatives on boards can draw on the advice of their officials, other board members do not have the benefit of this level of support. Local Enterprise Partnerships will need to provide a secretariat independent of local government to support the Chair and board in decision making.
We are determined to help local areas learn from what works best and where, so that we can work together to refine and maximise the impacts of major investments. Government will support all Local Enterprise Partnerships to develop a strong local evidence base of economic strengths, weaknesses and comparative advantages within a national and international context. We will require robust evaluation of individual projects and interventions. The additional funding that Government is providing each Local Enterprise Partnership will help to develop this capability and we will work with the LEP Network to develop and share best practice.
The revised Local Enterprise Partnership Assurance Framework, to be published in the Autumn, will provide further clarity on the leadership and capability requirements set out above.
2 https://www.gov.uk/government/publications/ftse-women-leaders-hampton-alexander-review
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Accountability and performance
As autonomous local partnerships, Local Enterprise Partnerships are primarily accountable to the communities within their area. In practice, the full and active role of senior local authority representatives on these boards provides a strong and direct link back to local people and are one part of the Local Enterprise Partnership’s democratic accountability. Whilst Local Enterprise Partnerships are individually accountable, Government remains accountable for the overall system and ensures appropriate mechanisms are in place to drive standards of accountability and performance across the network.
Case for change:
Government has awarded significant funding streams to Local Enterprise Partnerships, most notably the £9 billion through the Local Growth Fund. As this funding has increased, Government and Local Enterprise Partnerships have developed systems of governance and accountability to ensure that the devolved funding from central Government budgets is being managed effectively.
There have been criticisms around the accountability and performance of some Local Enterprise Partnerships. The level of transparency local partners want to see has been limited by the absence of comparability across differing Local Enterprise Partnership legal personalities and accountability frameworks. Furthermore, the significant differences in structures between Local Enterprise Partnerships contributes to the lack of consistency across the network. This has prevented Government from applying more targeted and transparent rules on performance. It has also meant that the public have been unclear on the role and the impact of Local Enterprise Partnerships in their areas.
Whilst Local Enterprise Partnerships have made significant progress in strengthening their accountability and transparency arrangements over the past few years, Government’s greater ambitions for these institutions requires a renewed commitment to accountability and a strengthened approach to performance to ensure that Local Enterprise Partnerships operate to the highest standards.
How the Government will support this change:
Government’s primary ambition is for Local Enterprise Partnerships to operate as a self- regulating sector, working with local partners and their peers through the LEP Network to drive improvements in governance and delivery and strive for excellence. The Government, the LEP Network and Local Enterprise Partnerships will develop a Local Enterprise Partnership sector-led approach to assessing and improving performance through regular peer review.
Although Local Enterprise Partnerships are locally accountable for their decisions, as the arbiter of the system and as the primary funding provider for Local Enterprise Partnerships, Government will retain accountability and oversight over the system as a whole. Local Enterprise Partnerships recognise the need to adhere to standards of transparency and accountability clearly set out in the National Assurance Framework. This is one element of the wider assurance system, which also comprises of Local Enterprise Partnership reporting to Government on agreed outputs, evaluation frameworks and
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annual performance reviews. In January 2018 we issued best practice guidance in response to the recommendations of the Ministry of Housing, Communities and Local Government Non-Executive Director Review into Local Enterprise Partnership governance and transparency.
Well performing Local Enterprise Partnerships are critical to creating successful local economies. To help ensure Local Enterprise Partnerships are performing to their highest standard there need to be clear expectations both from Local Enterprise Partnerships themselves and from Government around overall Local Enterprise Partnership performance and the performance of individual programmes. These will be used to support decisions around the level of control held over future funding programmes. The Government will set out more detail on how this system could work in due course.
Government will publish a statement regarding its approach to intervention in a revised National Assurance Framework where there are instances of non-compliance or underperformance. This will ensure that any intervention is proportionate and provides the appropriate levels of support to rectify issues. In the majority of cases, our intervention will be minimal as the sector matures and self-regulates to effectively address underperformance at the local level and through the network of Local Enterprise Partnerships. Where there are significant concerns, we will proceed using a spectrum of options ranging from regular, minuted performance meetings, the agreement of action plans with milestones and risk based deep-dives. In the most extreme instances, this could include direct intervention to express the Government’s loss of confidence in the Local Enterprise Partnership by withholding or withdrawing funding.
The performance of each Local Enterprise Partnership differs based on the individual circumstances of their place. Each Local Enterprise Partnership’s overall performance will be held to account through measures agreed in their delivery plans. The Government will work with Local Enterprise Partnerships to ensure that they have these plans in place by April 2019.
Government will continue to monitor Local Enterprise Partnerships through annual performance reviews and quarterly monitoring of data returns for major growth programmes to monitor risk. Performance assessments will be grounded in the three themes encompassing the objectives of a Local Enterprise Partnership: ‘Governance’, ‘Delivery’ and ‘Strategy’. In order to strengthen this system, we will introduce a mid-year review session with each Local Enterprise Partnership. This will enhance the existing annual performance review meetings and will focus significantly on strategic direction whilst also providing a forum for Government to highlight concerns with senior Local Enterprise Partnership officials.
How Local Enterprise Partnerships will support this change:
Government will support all Local Enterprise Partnerships to have a legal personality. Where they are not already incorporated as companies, Local Enterprise Partnerships that are not in mayoral combined authorities or combined authorities should take steps to become companies. Where Local Enterprise Partnerships are integrated within mayoral combined authorities and combined authorities exist, they may elect to use this legal personality. This new legal structure should be in place by April 2019, ahead of any release of further local growth funding. Ensuring that all Local Enterprise Partnerships
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have a legal personality reflects their more prominent role in local growth, that they are their own business-led organisations and will allow them to enter into legal commitments to take on further responsibilities in the future.
Local Enterprise Partnerships will continue to be individually accountable for the allocation of funding and the delivery and evaluation of projects, with Section 151 Officers (or equivalent) maintaining accountability for the proper conduct of financial affairs within the Local Enterprise Partnership. Local Enterprise Partnerships and Accountable Bodies are responsible for the success and day to day operations of the Local Enterprise Partnership. In addition, the revised National Assurance Framework will provide further clarity on the role of the Section 151 Officer and Accountable Body with regards to governance and financial oversight. Local Enterprise Partnerships will want to identify a single Accountable Body within in each area that is responsible for all Local Enterprise Partnership funding.
As legal entities, all Local Enterprise Partnerships will be required to hold an annual general meeting. We will set an expectation that these are open to the public and businesses to attend and be properly promoted. This provides Local Enterprise Partnerships with the opportunity to update the wider public on progress on growth plans and its ambitions for future growth and ensure the communities that they represent can understand and influence the economic plans for the area. To ensure that all businesses in an area have equal access to their Local Enterprise Partnership, we will not permit any Local Enterprise Partnership to operate on a paid-membership basis.
Local Enterprise Partnerships must be clear on who in their organisation is responsible for their activity – and who ought to be held to account. We will expect all Local Enterprise Partnerships to set out exactly who is accountable for spending decisions, appointments, and overall governance locally. Schemes of delegation must be clear and the Partnership should explicitly address the accountability arrangements and relationships between the Board, Chair, Local Enterprise Partnership CEO, Accountable Body and Sub-Boards (in MCA areas this should also include the Combined Authority Board and the Mayor).
The Government will support Local Enterprise Partnerships to set out how they will ensure external scrutiny and expert oversight, including participating in relevant local authority scrutiny panel enquiries to ensure effective and appropriate democratic scrutiny of their investment decisions. We want this to provide an opportunity to Local Enterprise Partnerships to engage local partners and independent experts – such as academics - when developing their strategies, whilst reassuring their partners that taxpayers money is being put to best use.
This legal framework and additional detail on assessing performance within the National Assurance Framework will provide a greater level of clarity for all partners whilst ensuring that Local Enterprise Partnerships remain independent, private sector led institutions.
The Government will continue to provide guidance on the accountability requirements and assurance and performance management process for Local Enterprise Partnerships.
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Geography
A strength of Local Enterprise Partnerships from the outset was their ability to bring together public and private sector leaders across functional economic areas to set a strategic vision and make decisions that transcend local administrative boundaries. However, in certain parts of the country, the benefits of this geographic scale have been tempered and the geographic boundaries have not provided the clarity needed to businesses and communities.
It is essential that communities served by Local Enterprise Partnerships are able to see a single vision and a compelling plan for their area. This will ensure that each Local Enterprise Partnership is in the best position to identify and align local interventions that maximise their economic impact.
The case for change:
When Local Enterprise Partnership geographies were first decided in 2011 they had a more strategic role with limited delivery responsibilities. Since then, the context in which they operate has changed greatly; as Government has committed over £9 billion from the Local Growth Fund to Local Enterprise Partnerships through three rounds of competitive Growth Deals.
To be fit for purpose as their roles and responsibilities are expanded once again, we need to ensure that Local Enterprise Partnership geographies provide simplicity, accountability and practicability. Whilst in most areas the existing arrangement has worked in practice, greater clarity and consistency is required if they are to meet Government’s increased ambition. It is therefore the right time to revisit geographic boundaries.
The recent Public Accounts Committee inquiry into Local Enterprise Partnership assurance processes was clear that we need to provide clarity and accountability on how we deliver value for taxpayers’ money. Local Enterprise Partnership accountability practices have been addressed throughout the wider review. The removal of overlaps forms a component part of a wider initiative to make these organisations more transparent, consistent and robust in the way that they allocate funding to drive growth across the country.
We must ensure that decision-making and delivery operate at the most appropriate geographical levels that maximise efficiency and effectiveness. In a number of instances since 2011, Local Enterprise Partnerships have amended their original boundaries, including the successful merger of Northamptonshire Local Enterprise Partnership and South East Midlands Local Enterprise Partnership, and we would expect any consideration of geographical changes to consider the most effective size and scale to operate over.
There is no universally accepted approach to measuring or defining functional economic areas and boundaries vary depending on the method used.3 However, we acknowledge
3 For example housing market definitions https://www.gov.uk/government/publications/future-cities- comparative-urban-governance, compared to labour market containment definitions
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that economic geographies often cross administrative boundaries and we want to see continued collaboration between Local Enterprise Partnerships and local authorities where this is the case.
How the Government will support this change:
As Local Enterprise Partnerships are central to future economic growth, Government will ask Local Enterprise Partnership Chairs and local stakeholders to come forward with considered proposals by the end of September on geographies which best reflect real functional economic areas, remove overlaps and, where appropriate, propose wider changes such as mergers.4 We will encourage Local Enterprise Partnerships and mayoral combined authorities to move towards coterminous boundaries where appropriate in line with the wider discussions on Local Enterprise Partnership geographies. These proposals should be submitted by 28 September 2018. Government will respond to these proposals in the autumn and future capacity funding will be contingent on successfully achieving this.
We recognise that Local Enterprise Partnerships are independent bodies and will have to work closely with local stakeholders to reconfigure their geographies to meet the future roles and responsibilities of Local Enterprise Partnerships. Once any changes to Local Enterprise Partnership boundaries have been agreed, we will work with each Local Enterprise Partnership to ensure that revised geographies come into effect by spring 2020 at the latest, recognising the need to deliver against existing commitments as well as transition to the new policy and funding landscape over these new geographies. This will simplify the allocation of future growth funding and rationalise the increasingly complex local growth landscape.
How Local Enterprise Partnerships will support this change:
Local Enterprise Partnerships should build on the strength of their existing partnership working to collaborate on common issues. Whilst we are removing all instances in which two or more Local Enterprise Partnerships geographies overlap, this is not to say that local partners should not participate in the development of other Local Enterprise Partnerships’ strategies. The Government expects collaboration between Local Enterprise Partnerships where interests are aligned when developing strategies to maximize their impact across their different objectives. This helps to ensure a more efficient use of resources and secure a better outcome than operating in isolation. This collaboration need not be restricted to neighbouring Local Enterprise Partnerships and will be particularly important where partnerships share a common interest or particular themes, for example, aerospace technologies.
https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/c ommutingtoworkchangestotraveltoworkareas/2001to2011, and variations of each. 4 This will also include removing any situation in which a lower tier or unitary authority is covered by two Local Enterprise Partnerships whose geographies do not overlap.
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Mayoral combined authorities
Since 2012, City Deals, Growth Deals and Devolution Deals have shifted power and funding to local areas to enable them to take strategic decisions about local priorities. These deals have enabled places to develop long-term plans and create the right conditions for prosperity.
Both Local Enterprise Partnerships and mayoral combined authorities are seeking to drive growth at a strategic economic geography, through place-based and locally-controlled policies and funds. It is essential that these bodies work together to respond to future opportunities and challenges.
The case for change:
The election of six mayors in mayoral combined authority areas in May 2017 was an historic step in the Government’s mission to deliver an economy that works for everyone, and the seventh city region mayor was elected in Sheffield City Region in May 2018.5 The Government and local leaders agreed a ‘minded to’ deal with North of Tyne at Budget 2017. On 20 July 2018 all of the authorities consented to deal. As a result the Government will proceed to lay the orders in Parliament. Government remains open to conversations with other local areas that wish to explore the potential for devolution, where clear local support and a strong economic case for doing so can be demonstrated.
In all of these areas, Local Enterprise Partnerships and local authorities have worked together effectively throughout the process of negotiating and implementing devolution deals. In this, Local Enterprise Partnerships have taken a distinct role from that of the mayoral combined authority, providing private sector expertise and challenge to drive and inform strategy and investment decisions, including on local growth funding, business support and skills.
It is crucial at this point to ensure that investors, businesses and the public have a clear understanding of the relationships between Local Enterprise Partnerships and mayoral combined authorities as they take on an ever greater strategic role. The relationship between these bodies reflects local priorities and varies from place to place. Government is committed to working with Local Enterprise Partnerships and mayoral combined authorities to ensure clarity and transparency on their respective roles and responsibilities, address potential inefficiencies and help strike the right balance between integrated decision-making and delivery on the one hand, and appropriate challenge and scrutiny on the other.
How Government will support this change:
Government will consolidate its engagement with mayoral combined authorities and their Local Enterprise Partnerships with a collaborative approach to agreeing Local Industrial Strategies. As set out in the Industrial Strategy, places in England with a Mayoral combined authority will have a single Local Industrial Strategy led by the mayor
5 Government signed the Cornwall devolution deal in July 2015. The content of this section does not apply to Cornwall as this deal does not include a Mayoral Combined Authority.
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and supported by the Local Enterprise Partnership. To ensure the maximum buy-in of key local stakeholders, we will expect mayoral combined authorities to work in partnership with their Local Enterprise Partnership to jointly develop and agree these strategies.
How Local Enterprise Partnerships and mayoral combined authorities will support this change:
To help ensure that Local Enterprise Partnerships have a distinctive role from the mayoral combined authorities, we will support Local Enterprise Partnerships and mayoral combined authorities to develop and publish agreements – brought together in a single document with relevant financial assurance frameworks – which set out their respective roles and responsibilities in a way that recognises the variation between places, while providing sufficient clarity on accountability for public funding.
We have set out five themes below which we would want to see addressed in these agreements:
Advisory and challenge function: how local partners will ensure that there is a strong, independent voice for the Local Enterprise Partnership in the decision making process within mayoral areas, and that the Local Enterprise Partnership Chair and Board are able to draw directly on appropriate support and expertise from staff.
Alignment of decision-making across a clear geography: how local partners will work together to ensure a clear, transparent decision-making process which minimises the impact of differences in organisations’ geographical boundaries. To assist with clarity and transparency, we would encourage areas to move towards coterminous Local Enterprise Partnership and mayoral combined authority boundaries, but recognising that this will not be possible in all cases.
Accountability: how the formal accountability relationship between the Local Enterprise Partnership and the mayoral combined authority will work. We would expect local partners to designate the mayoral combined authority as the formal Accountable Body for the Local Enterprise Partnership in terms of handling public money.
Efficiency and corporate identity: how the Local Enterprise Partnership and the mayoral combined authority will work together in their approach to staffing, branding and other resources and assets.
Overview and scrutiny: how the Overview and Scrutiny Committees of the mayoral combined authority and local authorities will interact with the Local Enterprise Partnership.
A move towards more aligned geographies would greatly strengthen democratic decision making and scrutiny between the Local Enterprise Partnership and mayoral combined authorities. We will encourage Local Enterprise Partnerships and mayoral combined authorities to move towards coterminous boundaries where appropriate in line with the wider discussions on Local Enterprise Partnership geographies.
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As agreed with Government, the London Local Enterprise Partnership is chaired by the Mayor of London and operates through the Greater London Authority (GLA) which acts as its accountable body for funding provided by Government. All decisions must comply with the GLA’s corporate governance, financial, legal and procurement frameworks and processes. We will work with London Economic Action Partnership to implement the changes outlined in this document as relevant.
The revised National Local Enterprise Partnership Assurance Framework and revised Single Pot Assurance Framework, to be published in the autumn, will provide further clarity on the requirements for mayoral combined authorities and Local Enterprise Partnerships in these areas.
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Managing the transition to strengthened Local Enterprise Partnerships
We want to ensure that Local Enterprise Partnerships maintain their momentum and move quickly to implement these changes and formally establish themselves in their new form.
This document has set out a plan for reform, to ensure Local Enterprise Partnerships continue to drive growth and remain credible organisations locally and nationally. This provides Local Enterprise Partnerships with defined role and responsibilities, and provides clarity on activities and objectives to deliver on the ambitions of the Government’s Industrial Strategy.
We will write to Local Enterprise Partnership Chairs to communicate the importance of the review and will work with them to develop revised proposals on geography by 28 September 2018 and a detailed plan for implementing the changes outlined in this document before 31 October 2018 at the latest. In order to deliver their role effectively, Local Enterprise Partnerships need financial support. As referred to above, to support Local Enterprise Partnerships in implementing these changes and embed evidence in Local Industrial Strategies, we will provide up to £20 million of additional funding between 2018-19 and 2019-20 to support Local Enterprise Partnerships to adopt these changes.
We will update the National Local Enterprise Partnership Assurance Framework so that these changes are included within Local Assurance Frameworks ahead of April 2019. The National Assurance Framework will be an essential part of our wider Local Enterprise Partnership assurance system to ensure that Local Enterprise Partnerships have in place the necessary systems and processes to manage devolved funding from central Government budgets effectively.
We recognise that some reforms will take longer to implement, particularly as we leave the European Union and Government considers key funding arrangements such as the UK Shared Prosperity Fund. We will work with these Local Enterprise Partnerships to ensure these reforms are implemented in a measured way and with least disruption to existing programmes.
This document has set out a step change in approach for both Local Enterprise Partnerships and Government. We will continue to work with Local Enterprise Partnerships to understand how the network can identify and apply best practice and develop a programme of training for Local Enterprise Partnership boards and executive teams. This will be supported by regular engagement from senior government officials, to ensure Local Enterprise Partnerships and all parts of Government work strategically together to deliver economic growth and prosperity across the country.
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Annex – Advisory Panel Joint Statement
The Industrial Strategy made clear Government “remains firmly committed to Local Enterprise Partnerships”, but that “performance has varied” across the country. The Industrial Strategy set out that Government will review Local Enterprise Partnerships.
To inform this review Ministers in MHCLG, BEIS and HMT established an external advisory panel. The panel met four times between December 2017 and May 2018 to discuss LEP best practice and opportunities for reform. The panel also provided advice on best practice in comparable private and public sector organisations.
Following these discussions and other engagement with officials, the advisory panel agrees that ministers should consider the following statement in concluding the review:
LEPs provide a rich partnership of private sector organisations, local government, education – including universities – and other key local institutions and will be central to the delivery of the Industrial Strategy, driving growth and productivity across England. These partners each make unique and critical contributions to the LEP model, ensuring its distinctive role, which the ministerial review of LEPs should recognise and promote. To ensure LEPs are credible organisations locally and nationally, working with stakeholders from across the public and private sector, LEPs should have a clear and simple mission, focused on strategy-setting and the prioritisation of resources. Partnership working is the key determinant of a successful LEP and should be promoted across the country, so LEPs can set effective strategies for long term change and economic improvement.
The panel recognises the important recommendations of Mary Ney’s Review of Local Enterprise Partnership Governance and Transparency and agrees that LEPs should have consistent, formalised and transparent governance arrangements. All LEPs should have the institutional capacity and capability to develop and maintain a robust evidence base to support and monitor the strategic vision and performance of an area. The review could consider how local authorities support LEPs, and how LEPs and other bodies such as the LEP Network collaborate to share best-practice and promote effective peer review within the sector.
To ensure LEPs maintain a culture of constructive challenge and bring strategic leadership for growth across their area, they should have a distinctive role from individual local government institutions, including combined authorities. LEPs should not crowd out or duplicate business organisations, which represent businesses at the local level, and the LEP review should consider how Government can ensure these distinct roles are maintained. The review should ensure that the accountable body role undertaken by a local authority is facilitated in appropriate membership arrangements and recognises the risk management role that body fulfils on behalf of the LEP. The review could also consider increasing the proportion of private sector members on LEP boards, but should remain cognisant of the need for clear accountability.
Effective boards represent the diverse communities and businesses of their economies, and those local bodies which contribute to growth. The best LEP boards draw on the expertise of an area’s business leaders and enable these individuals to
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engage with local and national government, and the education and skills sector, to identify, articulate and invest in economic priorities and support innovation. All LEPs should engage small- and medium-sized business leaders as well as larger firms in their governance, and be representative of their areas’ communities. Government and LEPs should show leadership on promoting diversity on boards and in effective decision-making.
LEPs’ activities should work towards targeted key performance indicators and effectively evaluate the impact of their projects, programmes and investments. The panel recognises the importance of local autonomy and differentiation, and that LEPs should hold themselves to account and be held to account by others on the basis of their performance against these measures. Transparent performance measures and expectations could be accompanied by a more nuanced range of actions and support from Government with regards underperforming LEPs. It is vital to provide stakeholders with confidence that all LEPs can deliver on the core roles and responsibilities set out for them.
It is important to ensure LEP boundaries provide clarity and transparency in decision making and recognise functional economic areas, whilst seeking to optimise opportunities for cross-LEP collaboration where common economic priorities are evident.
The terms of reference the advisory panel considered as part of the ministerial review were:
Define with greater clarity the strategic role of LEPs in driving growth and productivity for business; people; ideas; infrastructure; and place. Strengthen business leadership and corporate governance to ensure that LEPs remain diverse private sector-led organisations that can shape and challenge local economic decision making, through the adoption of best practice. Establish clear accountability through rigorous financial reporting and enforcement of transparency in decision making. Assess the impacts of boundary overlaps to ensure clarity, transparency and representation of functional economic areas. Improve organisational capability and planning certainty, including looking at options for a common incorporation model; how LEPs are resourced and the standardisation of organisational structures and reporting. Define the relationship between LEPs and Local Authorities, as well as new organisational structures such as Mayoral Combined Authorities.
The panel members were: Dr Adam Marshall – Director General of the British Chambers of Commerce Cllr Anne Western – Leader of the Labour Group, Derbyshire County Council, and Vice-Chair of the Local Government Association’s People and Place Board Cllr Bob Sleigh OBE – Deputy Mayor of the West Midlands Combined Authority and Leader of Solihull Council Christine Gaskell MBE – Cheshire and Warrington Local Enterprise Partnership Chair and representative of the LEP Network Management Board
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Professor Diane Coyle CBE – Bennett Professor of Public Policy, University of Cambridge, and Co-Chair of the Industrial Strategy Commission Cllr Gordon Birtwistle – Councillor and former MP for Burnley Cllr Judith Blake – Leader of Leeds City Council Professor Judith Petts CBE – Vice Chancellor of University of Plymouth and Heart of the South West Local Enterprise Partnership Board Member Cllr Manjula Sood MBE – Deputy Mayor of Leicester City Council Martin McTague – Policy Director at the Federation of Small Businesses Mary Ney – Non-Executive Director at the Ministry of Housing, Communities and Local Government, and former Chief Executive of the Royal Borough of Greenwich Sherry Coutu CBE – Chair of the Scale-Up Institute, Chair of the Financial Strategy Advisory Group, University of Cambridge, and Non-Executive Director for the London Stock Exchange Group Stephen Greenhalgh – Joint Managing Director of J&J Omerod PLC
Page 70 30 Agenda Item 7
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
Non-Key Decision
REPORT OF THE DIRECTOR OF POLICY AND STRATEGIC COMMISSIONING
INTERNATIONAL HOLOCAUST REMEMBRANCE ALLIANCE WORKING DEFINITION OF ANTI-SEMITISM
1. PURPOSE OF REPORT
1.1 Arising from the Combined Authority meeting of 21 September 2018, this report will enable the International Holocaust Remembrance Alliance (IHRA) definition of anti- Semitism to be officially adopted.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority formally adopts the IRHA working definition of anti-Semitism, with examples.
3. BACKGROUND
3.1 The International Holocaust Remembrance Alliance (IHRA) is an intergovernmental organisation founded in 1998 which unites governments and experts to strengthen, advance and promote Holocaust education, research and remembrance worldwide and to uphold the commitments of the Declaration of the Stockholm International Forum on the Holocaust. The IHRA has 31 member countries, two liaison countries and nine observer countries.
3.2 IHRA adopted the Working Definition of Anti-Semitism at a plenary session in 2016. On 1 June 2017, the European Parliament voted to adopt a resolution calling on European Union member states and their institutions to adopt and apply the definition. The non-legally binding working definition includes illustrative examples of anti-Semitism to guide the IHRA in its work. These examples include classical anti-Semitic tropes, Holocaust denial and attempts to apply a double standard to the state of Israel.
Page 71 3.3 This is the IHRA working definition:
“Anti-Semitism is a certain perception of Jews, which may be expressed as hatred toward Jews. Rhetorical and physical manifestations of anti-Semitism are directed toward Jewish or non-Jewish individuals and/or their property, toward Jewish community institutions and religious facilities.”
The following examples may serve as illustrations:
Manifestations might include the targeting of the state of Israel, conceived as a Jewish collectivity. However, criticism of Israel similar to that leveled against any other country cannot be regarded as anti-Semitic. Antisemitism frequently charges Jews with conspiring to harm humanity, and it is often used to blame Jews for ―why things go wrong.‖ It is expressed in speech, writing, visual forms and action, and employs sinister stereotypes and negative character traits.
Contemporary examples of anti-Semitism in public life, the media, schools, the workplace, and in the religious sphere could, taking into account the overall context, include, but are not limited to:
. Calling for, aiding, or justifying the killing or harming of Jews in the name of a radical ideology or an extremist view of religion.
. Making mendacious, dehumanizing, demonizing, or stereotypical allegations about Jews as such or the power of Jews as collective — such as, especially but not exclusively, the myth about a world Jewish conspiracy or of Jews controlling the media, economy, government or other societal institutions.
. Accusing Jews as a people of being responsible for real or imagined wrongdoing committed by a single Jewish person or group, or even for acts committed by non-Jews.
. Denying the fact, scope, mechanisms (e.g. gas chambers) or intentionality of the genocide of the Jewish people at the hands of National Socialist Germany and its supporters and accomplices during World War II (the Holocaust).
. Accusing the Jews as a people, or Israel as a state, of inventing or exaggerating the Holocaust.
. Accusing Jewish citizens of being more loyal to Israel, or to the alleged priorities of Jews worldwide, than to the interests of their own nations.
. Denying the Jewish people their right to self-determination, e.g., by claiming that the existence of a state of Israel is a racist endeavor.
Page 72 . Applying double standards by requiring of it a behavior not expected or demanded of any other democratic nation.
. Using the symbols and images associated with classic anti-Semitism (e.g., claims of Jews killing Jesus or blood libel) to characterise Israel or Israelis.
. Drawing comparisons of contemporary Israeli policy to that of the Nazis.
. Holding Jews collectively responsible for actions of the state of Israel.
4. RESOURCE IMPLICATIONS
4.1 There are no resource implications arising directly from this report.
5. RISKS AND MITIGATION
5.1 There is a risk that failing to make clear the Combined Authority’s strong support for the IHRA working definition of anti-Semitism will send a counter message creating space that legitimises by omission hatred of Jews. This will therefore be mitigated by expressing unequivocal support for the IHRA working definition of anti-Semitism.
6. EQUALITY AND DIVERSITY IMPLICATIONS
6.1 As a recognised ethnic minority, Jews are protected from hate and discrimination by existing UK legislation, such as the Crime and Disorder Act 1998, and the Equality Act 2010.
6.2 However, such legal protection operates on the basis of a high bar that can fail to take account of the insidious nature of anti-Semitism, where even the lack of an agreed definition has undermined efforts to counter anti-Jewish hatred.
6.3 The IHRA working definition has therefore been developed and promulgated in order to ensure that culprits will not be able to get away with being anti-Semitic because the term is ill-defined, or because different organisations or bodies have different interpretations of it.
7. COMMUNICATION ISSUES
7.1 On Monday 17 September 2018 the Metro Mayor Mr Rotheram met with the Jewish Leadership Council and representatives of the Jewish community from across the City Region. Everyone was concerned about the latest figures from the Community Security Trust, which showed that nationally instances of anti-Semitism rose by 30% in the first six months of 2017 and remained at record levels.
Page 73 8. CONCLUSION
8.1 For the aforementioned reasons it is apposite for the Combined Authority to be taking a stand against hate and discrimination in all its forms, but particularly anti- Semitism in the current climate, by adopting the IHRA working definition and making a strong statement to underline that the Combined Authority’s vision is for a fair and prosperous Liverpool City Region that is a safe, tolerant place to visit, live, work and prosper for all people, true to historic traditions.
KIRSTY PEARCE Director of Policy and Strategic Commissioning
Contact Officer(s): Olly Martins – Lead Officer for Fairness and Social Inclusion (0151 330 1187)
Page 74 Agenda Item 8
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
Key Decision
REPORT OF THE DIRECTOR OF POLICY AND STRATEGIC COMMISSIONING AND PORTFOLIO HOLDER: EDUCATION, EMPLOYMENT, SKILLS AND APPRENTICESHIPS
LIVERPOOL CITY REGION SKILLS INVESTMENT STATEMENT 2019/2020
1. PURPOSE OF REPORT
1.1 The purpose of this report is to seek approval for the Liverpool City Region Skills Investment Statement 2018/19 of local needs.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority:
(a) Endorse the Liverpool City Region Skills Investment Statement 2019/2020 of local needs as set out in Appendix One; (b) Request that the Employment and Skills Board monitor the progress of the delivery of those actions throughout 2019/20.
3. BACKGROUND
3.1 Liverpool City Region Combined Authority agreed its’ Skills Strategy in March 2018. This sets out an ambitious schedule of activity and actions, designed to improve the skills level, economic output and employment of both residents and businesses in the City Region, as part of an overall inclusive growth approach. It covers activity around delivering the following outcomes:
1) A higher percentage of our young people have good attainment levels in English, Maths and Digital skills, and higher levels of work readiness; 2) A higher percentage of the working age population is employed, and good quality jobs are a higher percentage of all jobs; 3) Across the key growth sectors, there is higher productivity and a lower incidence of skills shortages;
Page 75 4) Across all sectors there are more effectives workforces and fewer local recruitment difficulties; and 5) Employers are investing significantly more in the quality and quantity of the skills of their workforce.
3.2 The Strategy sets out a broad set of actions to be delivered over the period 2018- 2023, noting that not all can be delivered in one year. There is a need to focus down activities and to identify priorities for commissioning and procurement: this includes identifying the priorities for commissioning the devolved Adult Education Budget. These focused actions which require activity in 2019/2020 are set out in the Skills Investment Statement 2019/2020.
4. SKILLS INVESTMENT STATEMENT 2019/2020
4.1 The draft Skills Investment Statement 2019/2020 is attached as Appendix One. This reports upon the progress towards delivery of the actions from the 2018/19 Statement, highlights key changes in labour market and identifies a number of key issues for action.
4.2 Employment and Unemployment rates are improving but a gap remains to national levels. The employment and unemployment rates in the City Region have improved in recent years, but remain less favourable than national levels, particularly for females in work, unemployed males and employed and unemployed black and minority ethnic people.
4.3 There remains a high proportion of economically inactive residents. The City Region has had high levels of economically inactive residents for many years, and has the highest rate of residents on sickness benefits nationally. The levels have fallen slightly but remain high: as a longstanding issue, this will take time to address.
4.4 Attainment at age 16 remains below national levels and inhibits the development of technical skills. There is significant work under way in different areas to improve this. The attainment of GCSEs (Level 2) of residents at age 16 is below national levels. Although this gap is narrowed by age 19, it results in an attainment lag and lost opportunities to pursue academic routes post school and develop the Level 3 technical skills that are valued by employers, until later in life or not at all.
4.5 The implementation of apprenticeship funding and curriculum reforms has had a detrimental impact on starts and provision. Overall apprenticeship starts locally have fallen in the first part of 2017/18 with the fall in the City Region larger than the fall nationally. 16-18 year olds apprenticeship starts locally held up relatively well whilst starts for over 25s have fallen significantly. Discussions are continuing with Government about actions to mitigate the impact of the funding reforms.
4.6 The proportion of residents without qualifications remains high, particularly for over 50s. The proportion of residents in the City Region without a qualification has been high and this is most acute for residents aged over 50. Targeted efforts are required to narrow this gap.
Page 76 4.7 The proportion of residents with mental health issues is rising. Residents with mental health issues has risen over a number of years. Services report residents presenting with an increased combination of more complex conditions.
4.8 Barriers to learning and engagement need to be identified and addressed with help from provides of learning: these can include financial, travel, childcare or finding the right provision.
4.9 Work readiness is generally good, but employer feedback suggests the need for improvement in the Health and Social Care, Visitor Economy and Manufacturing sectors. The Employer Skills Survey found that overall work readiness of new staff was higher in the City Region than nationally. However, employers from Health & Social Care and Visitor Economy sectors reported that new recruits were not as work ready as other employers.
4.10 Specific skills gaps in Digital, Manufacturing and Construction Sectors and in Leadership and Management need to be narrowed. The Employer Skills Survey also found that there were specific skills gaps in Digital, Manufacturing and Construction sectors. In addition, there are specific gaps in leadership and management skills, particularly for micro and large organisations.
4.11 There are a significant number of people for whom English is not their first language and who need additional support. There is provision in place, funded through the Adult Education Budget,
4.12 There is consistent and widespread feedback from employers and stakeholders that careers services are not as effective or efficient as they could or should be. There is an extensive number of people and providers involved in the provision of careers education and advice and guidance, which require cohering locally to ensure consistent messages. The Combined Authority has begun to cohere this through the Careers Hub and there are opportunities to improve this (e.g. through the Schools Careers Hub) in the coming months.
Key actions
4.13 The Statement then identifies a number of key actions to be implemented in 2019/2020: these are for employment and skills providers, Councils, the Combined Authority and Government to implement.
Improve attainment in English, maths, digital and work readiness Schools should ensure that more pupils are able to gain Level 2 qualifications at age 16 and collaborate more on the implementation of effective practice in appropriately targeted and differentiated interventions and support based on learner needs; Combined Authority to complete the Skills for Growth Action Plan on English, Maths and employability skills and share this learning widely; Colleges, Community Learning Providers and Independent Training Providers to trial different approaches to engage learners who need to develop require maths, English, particularly for those who over 50s; Cohere the development of careers materials and delivery of careers provision across the City Region through the Careers Hub;
Page 77 Support the development and delivery of the Schools Careers Hub and ensure that the learning is spread widely; Combined Authority to work with Jobcentre Plus and Local Authorities to ensure ESOL provision has consistent quality initial assessment and delivery; Combined Authority and LEP Digital and Creative Board to establish Digital Skills Partnership to implement the recommendations of the Digital Skills for Growth Action Plan; and Combined Authority to consider the digital skills needs and accessibility of skills through digital mediums ahead of the digital entitlement in 2020/21.
Raise working age employment rate and improve the proportion of good quality jobs Combined Authority to ensure that jobseekers are able to access training and work experience opportunities through the commissioning of more Sector Based Work Academy places; Colleges and independent training providers to ensure that skills provision for unemployed people is flexible and meets the needs of learners and employers; Combined Authority to continue to deliver the innovative Households into Work Programme and ensure that learning is disseminated widely; Colleges and Independent Training Providers to agree arrangements to secure greater alignment between Traineeships, Apprenticeship and Adult Education Budget provision linked to progression pathways; Combined Authority to commission provision to narrow specific employment gaps around black and ethnic minority groups and disabilities; and Jobcentre Plus to utilise funding through Flexible Support Fund to commission additional support to help unemployed people into work.
Higher productivity and fewer skills shortages in growth sectors Colleges, Independent Training Providers and Universities to implement the findings of the sectoral Skills for Growth Action Plans; Universities to explore the potential for further employability programmes to link closely with local employers; Combined Authority to work with Colleges and Independent Training Providers to support the implementation plans for T levels; Support employers through the Apprenticeship Hub to access apprenticeships as a workforce development and skills investment solution; Skills Commission to identify and support groups of employers in key sectors to better aggregate demand for Skills Investments, particularly in key sectors such as Health and Care, Construction and Digital; Combined Authority to facilitate the extension of sector based Skills Networks (drawing together employers and colleges and independent training providers) to ensure that all growth sectors are covered; and Colleges, Independent Training Providers and Universities to ensure that skills provision for employed people looking to progress is flexible and can be accessed at different times and through different methods;
More effective workforces and fewer local recruitment difficulties across all employers Careers Hub to develop and publish more detailed progression pathways reflecting job roles and learning options; and Employers from Digital, Construction and Manufacturing need to articulate more effectively their specific technical skills needs to colleges and independent Page 78 training providers: this can be organised through the LEP Sector Boards and College and Independent Training Provider Curriculum Networks in addition to the Skills for Growth Reports; Combined Authority to encourage the provision of sector based work academies and other pre-employment support aligned to local recruitment needs.
Employers are investing more in the skills of their workforces Combined Authority to review the Skills for Growth Brokerage services and ensure that independent employer brokerage on skills is available to local employers; Colleges, Independent Training Providers and Universities to review their leadership and management provision to ensure that it is flexible and meet the needs of all employers; and Combined Authority to consider the findings of the 2018/2019 National AEB funding rules fully funded skills provision pilot for those with low skills and low pay.
Simplifying the skills system Combined Authority to commission Adult Education Budget from 2019/2020 in line with stated priorities to meet the needs of learners and employers; Combined Authority to work collaboratively with strategic partners to align the devolved Adult Education Budget funded provision in Liverpool City Region with other adult funding streams to ensure they complement the wider learning experiences of residents; and Combined Authority to oversee commissioning of remaining ESF and Skills Capital funding in line with stated priorities.
Apprenticeships Combined Authority to commission additional ESF funding to support the promotion and take up of apprenticeships as set out in the Apprenticeship Growth Plan; Combined Authority to implement the Apprenticeship Application Portal, making it easier for people to apply for apprentices; and Combined Authority to continue to lobby Government for changes to the apprenticeship funding system to allow for necessary local flexibilities;
Capacity building measures Providers should ensure that their staff are kept up to date on mental health issues and referral points to relevant healthcare provision as appropriate; Ensure that providers further develop their capacity to respond to current and future learner entitlements, in particular maths, English and digital.
4.14 There is a further opportunity to draw together a number of initiatives as part of simplifying the approach to skills engagement and provision. This will form an underpinning part of the implementation of the actions in the Skills Investment Statement 2019/2020.
4.15 The Combined Authority are recommended to approve the Skills Investment Statement 2018/19 as attached as Appendix One. Colleges, Councils and Independent Training Providers will be asked to articulate how they are responding to the priorities set out, to cover provision funded by the Adult Education Budget and links to wider provision. This will be a summary of specific measures taken and Page 79 a number of key performance measures to be tracked. The progress of this will be monitored by the Employment and Skills Board, with learning taken into the process for 2019/20.
5. RESOURCE IMPLICATIONS
5.1 Financial
The recommendations for actions set out in the Skills Investment Statement 2019/2020 will inform the commissioning and procurement decisions of the Combined Authority. The full financial implications will be considered as part of each decision.
5.2 Human Resources
There are no direct Human Resources implications arising from the implication of the recommendations in this report.
5.3 Physical Assets
There are no specific Physical Assets implications associated with the implementation of the recommendations in this report. Commissioning of Skills Capital funding will follow the priorities identified in the Skills Investment Statement 2019/2020.
5.4 Information Technology
There are no specific Information Technology implications associated with the implementation of the recommendations in this report.
6. RISKS AND MITIGATION
6.1 There is a risk that information on local priorities is not available in time to be reflected in curriculum planning for the 2019/2020 academic year. This has been mitigated by producing a timely Skills Investment Statement for 2019/2020.
6.2 There is a risk that providers commit to deliver priorities but do not do so. This will be mitigated by those actions being monitored by the Employment and Skills Board.
7. EQUALITY AND DIVERSITY IMPLICATIONS
7.1 Consultation has taken place with a wide range of stakeholders in the preparation of the Skills Strategy on which the Skills Investment Statement 2019/2020 has been based, which included specific feedback on groups with protected characteristics.
7.2 A full equality and diversity assessment has been conducted and identified no further actions.
Page 80
8. COMMUNICATION ISSUES
8.1 The Skills Investment Statement 2019/2020 has been subject to consultation with stakeholders. The final version will be published on the Combined Authority and Employment and Skills Board websites, and circulated to recipients of Adult Education Budget grant funding and other key stakeholders.
9. CONCLUSION
9.1 This report has sought approval for the Skills Investment Statement 2019/2020.
KIRSTY PEARCE Director of Policy and Strategic Commissioning
COUNCILLOR IAN MAHER Portfolio Holder: Education, Employment, Skills and Apprenticeships
Contact Officer: Rob Tabb, Interim Policy Lead: Employment and Skills, Combined Authority (0151 330 1250)
Appendices: Appendix One – Liverpool City Region Skills Investment Statement 2019/2020
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Page 84 Skills Investment Statement 2019-2020 3
Foreword
Making sure that people have the skills to get a job and progress in work and employers have people with the right skills they need for growth remains a key task for the Liverpool City Region Combined Authority. Improving skills levels will help to improve the productivity and economic output of our employers, as well as ensuring that they can benefit from this growth.
The nature of work is changing quickly, and all of us need to continue to develop our skills. We all need to develop more flexibility and an understanding of how we learn if we are to be successful in this.
This Skills Investment Statement 2019/2020 builds upon our Skills Strategy and identifies a number of detailed actions for implementation; these might be programmes to deliver or from mainstream service delivery. These will be reflected in the Combined Authority’s work and commissioning approaches. It also shows the progress on the implementation of actions from last year’s Statement.
The devolution of the Adult Education Budget from Government to the Combined Authority in 2019/2020 marks the start of our journey as we begin to provide greater local direction over employment and skills provision. This new role will enable the Combined Authority to focus on meeting local area need and economic objectives. It will also lead to new ways of working together to deliver adult skills and learning with the provider base.
Our determination to make a difference is matched only by the depth of our collaboration; strengthening our determination and enhancing our collaboration further will give us an even surer foundation to build upon. Together, we can see our ambition and vision realised.
Steve Rotheram Cllr Ian Maher Liverpool City Region Metro Mayor Liverpool City Region Portfolio Lead, Skills and Apprenticeships
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Skills Investment Statement
Purpose • Create direction and bring focus to the response required from providers and employers to address This Skills Investment Statement 2019/2020 considers the key labour market evidence and wider • identified skills priorities; Provide a framework for local public and private strategic context for the Liverpool City Region • skills investments; and impacting on the development and delivery of skills Stimulate and support partnership working to needed for sustainable and inclusive economic • bring greater strategic alignment on skills priorities growth. It identifies the key actions from the across stakeholders. Liverpool City Region Skills Strategy for focus in 2019/2020, reflecting the changes in the economic This is intended to cover all skills funding in the and labour market. It provides a policy context and Liverpool City Region, with a particular focus on the strategic focus for the commissioning of the City deployment of the Adult Education Budget. Region’s Adult Education Budget in 2019/20: this will be the first time that the Combined Authority is able This Statement is scheduled to allow strategic to commission this funding since devolution. priorities to be reflected in Adult Education Budget The purpose of the Skills Investment Statement is to: commissioning and for the provider base to reflect these actions priorities in their business planning approach for 2019/2020. • Bring clarity to the scale and nature of Liverpool City Region skills issues and to identify where local interventions are likely to have greatest impact;
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Background the existing labour force as retirement age increases. This is harder and costly to achieve given Liverpool City Region Economy the multiple complex barriers that many residents face. Over the past two decades Liverpool City Region has undergone an economic renaissance, with a The skills levels of residents in the City Region have diversifying economy of internationally-oriented generally been increasing in recent years, there markets and businesses. A growing number of remains significant skills gaps at all levels, with globally significant companies, including Unilever, progress earlier in life key to the progression into Jaguar Land Rover, Dong Energy, IBM and Inovyn, advanced technical and higher level skills. are investing heavily in our economy. The economy Apprenticeship starts were high in 2016/17 but have generates £30.5bn of output. Productivity per fallen significantly in 2017/18 to date, with the City resident and per hour worked have both improved Region having a greater fall than nationally. in recent years, but there remains a gap to regional and national rates. Skills Strategy 2018-2023
Since 2010 approximately 55,000 private sector jobs The Combined Authority agreed the Liverpool City have been created. Currently the City Region has a Region Skills Strategy 2018-2023 at its meeting in stock of 51,580 business units, of which over 99% March 2018. Based on extensive stakeholder input are SMEs. We have significant strengths and huge and underpinned by the Skills Survey of over 1,800 potential in innovative and globally-competitive employers, the Skills Strategy identifies a focused sectors: Advanced Manufacturing, Digital and series of actions designed to improve the Creative, Financial and Professional Services, Health employment levels of individuals, improve the and Life Sciences, Low Carbon Energy, Maritime and access of employers to skills and increase the Logistics, and the Visitor Economy. productivity of employers across the City Region. These are shaped around six action areas: More than 1.5million people live within Liverpool City Region, of which 976,500 are of working age (16-64 years). Currently there are 613,700 jobs and over 81,000 self-employed people.
Liverpool City Region has seen significant growth in the number of people in employment over the last five years, and a commensurate fall in unemployment: wage rates remain low in comparison to other parts of the country. Employers are however reporting greater difficulties in recruiting skilled staff, demonstrating there is a tightening in the labour market.
The City Region is relatively well contained as a labour market with low levels of in commuting, as well as having low projections of population change. Future growth in the workforce will therefore need to come from supporting those who are economically inactive into work and the trainingPage of 87 6
These longer term actions are being implemented and where appropriate these will be reflected in the Skills Investment Statement for 2019/2020.
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Policy Context Recent changes have been announced allowing learning to study for English and maths GCSEs Adult Education Budget alongside a T Level with additional hours of learning. However the key issue for the City Region is still the Transition Period (previously Transition Year) Adult Education Budget is being devolved to the required to get young people to Level 2 before they Combined Authority from 1 August 2019 for the can embark upon a Level 3 qualification. There are academic year 2019/2020 following legislative still details about this which need to be resolved. changes and the Combined Authority successfully Further work is also required on bridging meeting a series of readiness conditions. This will qualifications between technical and academic enable local priorities for skills and training to be routes. This is a significant change to technical reflected as this provision is commissioned, as set education provision and will require changes to be out in this Investment Statement. made to curricula, teaching approaches and facilities. Technical Education Apprenticeships There are significant changes to technical education being implemented. This will see a simplification of Apprenticeship reforms have started to have an classroom based technical qualifications available impact on the provision available to and taken up by and reduction in awarding organisations with a employers and their employees. Since May 2017 the focus on specific occupational routes to reflect way apprenticeships are delivered and paid for in where there are similar skills requirements. Routes England have changed, underpinned by a new will include: apprenticeship levy and a curricula move from frameworks to standards. There is evidence to • Agriculture, Environmental and Animal Care suggest the reforms are impacting on employer • Business and Administrative demand for apprentices, leading to uncertainty for • Catering and Hospitality Colleges and Independent Training Providers from a • Childcare and Education business planning perspective. • Construction • Creative and Design • Digital • Engineering and Manufacturing • Hair and Beauty • Health and Science • Legal Finance and Accounting • Protection Services * • Sales, Marketing and Procurement * • Social Care * • Transport and Logistics * * Primarily delivered through apprenticeships
Alongside this, there will be the introduction of T levels at Level 3 (as a technical equivalent to A Levels) as a new qualification. T levels will include a 3 month work industrial placement, which is deisgned to prepare young people to be work ready. The first 3 T Levels will be in Childcare and Education (Education Pathway); Digital (Software Applications Design Pathway) and Construction (Building, Services, Engineering pathway) in 2020 with others by 2023.
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Review Of Actions From 2018/19
This Skills Investment Statement 2018/19 set out a number of key actions for immediate implementation. The table below provides an update on their implementation:
Action Progress 16-24 year olds Combined Authority to commission additional wrap-around Procurement is under way support (based upon previous experience and delivery) for 16- 18 year olds at risk of being not in education, employment and training from European funds Colleges and Independent Training Providers should continue to This remains a key focus of activity support learners to achieve their Level 2 qualifications as soon for colleges and independent as possible to enable progression to Level 3 academic and training provides. technical skills.
Action Progress A Lifelong Skilled Workforce Support for those that require maths, English and digital skills Providers have continued to offer needs to continue to be available and targeted for over 50s, this support and consider alternative including through Community Learning. ways of outreach. The Skills Commission will identify how collectively employers The Skills Commission has and individuals can take action and responsibility to improve commissioned sector progression the skills levels of older workers in the light of individuals being pathways for the priority sectors required to work for longer; this includes better approaches which are now also being used to from employers to retaining existing staff and skills, retraining shape additional careers materials. for employees and supporting individuals to refresh their skills and rethink their career choices later in life. The 2018 / 2019 National AEB funding rules has included a pilot to fully fund learning for those working at or below a wage of £15,737. The Combined Authority will look to the findings of this pilot in considering how those with low skills and low pay can benefit from the AEB following devolution.
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Action Progress Adult Employability Skills Working collaboratively with all local partners, Colleges and The provision of Sector Based Work Independent Training Providers need to consider how they can Academies to prepare people for do more/adopt new ways to help economically inactive work has fallen although it is noted residents into work that other pre-employment support may be available. Combined Authority will commission additional employment Procurement is under way support for groups which have a gap to overall employment rates from European funds;
Provision of employability skills to unemployed residents needs This remains an issue for employers to be more tailored to the requirements of employers in Health in this sector and this provision & Social Care, Visitor Economy and Manufacturing sectors needs to be more targeted than hitherto. Skills for Growth Action Plans are identifying specific actions to meet employer needs, which may include more use of Sector- Based Work Academies and pre- employment training.
Action Progress Sector specific actions Employers from Digital, Construction and Manufacturing need Specific detailed Skills for Growth to articulate more effectively their specific technical skills needs Action Plans are either complete or to colleges and independent training providers: this can be in the final stages of completion. organised through the LEP Sector Boards and College and Independent Training Provider Curriculum Networks in addition The Combined Authority welcomes to the Skills for Growth Reports. developments towards the introduction of T Levels and will be working with the Gatsby Charitable Foundation and local colleges and providers to ensure successful introduction locally.
The Combined Authority will work with Department for Education colleagues to better understand the impact of the National Retraining Scheme for Digital and Construction and ensure successful introduction locally. Colleges, Independent Training Providers and Universities need Additional management training is to scale up the provision of leadership and management being provided although the form training, possibly through apprenticeships, targeted in and scale of this may need to be particular at micro employers: this may require new forms of reviewed. Level 4+ apprenticeships delivery (e.g. online) to meet their needs. delivered to Liverpool City Region residents is rising, with 400 in 2015/2016 and 690 in 2016/2017.
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Action Progress Apprenticeships Employers and providers must engage fully in the development Complete and published in March of an Apprenticeship Growth Plan to identify how to grow the 2018. number, quality, level and breadth of apprenticeships. Providers of apprenticeship training need to promote the The number of 16-18 year olds benefits of recruiting 16-18 year olds to employers, to ensure starting apprenticeships has not employer succession planning and skills retention. fallen as much as the overall starts level. Colleges and Independent Training Providers should ensure that Overall completion rates fallen in there is as much focus on apprenticeship completions as there is comparison to national levels on apprenticeship starts to improve employee quality and although completion rates have yet retention, in the context of a long term contraction in the to be published since the number of younger people entering the labour market in the introduction of apprenticeship Liverpool City Region. reforms.
Action Progress Capacity building measures Providers should ensure that their staff are kept up to date on Regular briefings and updates have mental health issues and referral points to relevant healthcare been provided. provision as appropriate. Combined Authority to broker relationships between mental In progress. health services, Colleges and Independent Training Providers to promote specialist services and referral points. Colleges and Independent Training Providers to agree Work continues to develop clear arrangements to secure greater alignment between progression routes for learners Traineeships, Apprenticeship and Adult Education Budget following completion of training provision linked to progression pathways. provision. Schools should ensure that more pupils are able to gain Level 2 The proportion of pupils achieving qualifications at age 16, and the Regional Schools Commissioner Level 2 qualifications at 16 has to identify adequate support and progression routes to enable improved though there is still a gap this. to national rates. Skills Commission should identify and promote Liverpool City In progress. Region’s competitive skills advantage. Colleges and Independent Training Providers should maximise This remains a challenge. Colleges spend on local residents of their Adult Education Budget and Independent Training Providers funding allocations to maintain locality grant levels ahead of should endeavour to put in place devolution. actions to maximise spend on local residents ahead of AEB devolution. Combined Authority to lobby Government to improve access to Discussions remain in progress. data to reduce duplication of efforts between providers working to different Government Departments.
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Key Issues for 2019-2020
Employment and Unemployment rates are improving but there remains a gap to national levels
The employment rate within the City Region has lagged national rates for some time, and the gap has narrowed in recent years.
Chart 1 – Comparison of employment rates (aged 16-64) in Liverpool City Region and elsewhere
75
72.5
70
67.5
65 April 2014 - March 2015 April 2015 - March 2016 April 2016 - March 2017 April 2017 - March 2018
Liverpool City Region Greater Manchester North West England Great Britain
Chart 2 – Population profile for Liverpool City Region and England
Population profile
Liverpool City 21% 26% England
4% 5% Employed 69% Unemployed 75% Inactive
There is still a significant gap to national rates, which is higher in the City Region than in most other economic areas. There are more males in work than females in the City Region: the gap on females in work has widened in the last year. There are fewer black and minority ethnic people in work than overall, and the gap is wider in the City Region than nationally, although this has narrowed. There is a smaller proportion of people with a disability in work in the City Region than nationally.
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Table 1 – Employment Rate (March 2018) Source: NOMIS
Liverpool City England Gap 2018 Gap Region 2017 Overall 70.5% 76.0% 5.5% 5.5% Males 74.9% 80.6% 5.7% 6.6% Females 66.2% 71.4% 5.2% 4.4% Black and minority ethnic people 59.7% 65.1% 5.4% 6.4% People with a disability 43.5% 53.9% 10.4% 10.8%
The unemployment rate within the City Region remains higher than national levels, and this gap has increased in recent months. There are more males and slightly fewer females registered as unemployed in the City Region than national rates, and a slightly lower rate of black and minority ethnic residents than nationally.
Table 2 – Unemployment Rate for 16-64 year olds (March 2018) Source: NOMIS
Liverpool City England Gap Gap Region 2018 2017 Overall 4.8% 4.2% 0.6% 0.1% Males 5.4% 4.1% 1.3% 0.8% Females 4.1% 4.2% -0.1% 0.6% Black and minority ethnic people 7.3% 7.4% -0.1% 0.5%
The levels of young people who are Not in Education, Employment and Training (NEET) are increasing. There is extensive provision in place to support young people, through mainstream and European funds: additional wraparound provision is being procured to ensure that young people can access the correct provision.
There remains a high proportion of economically inactive residents
The overall level of economically inactive people within the Liverpool City Region is high compared to national rates, and had been for some time.
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Chart 3 – Economic inactivity rates comparison for Liverpool City Region, Tees Valley and West Midlands Combined Authorities and England Source: NOMIS
Economically Inactive Residents 32.0
30.0
28.0
26.0
24.0
22.0
20.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Liverpool City Region Tees Valley West Midlands England
This is most pronounced for residents who are in receipt of sickness benefit, as shown below:
Table 3 – Number and rate of residents receiving sickness benefit in Liverpool City Region and nationally
Residents in receipt of sickness benefit Liverpool City Region England (November 2017)
Number 93,720 1,946,170 Rate 13.3% 7.1%
There has been a reduction in the rate locally in recent years, but this is still significantly higher than the national rate: reducing the sickness benefit rate to national levels would see 43,000 fewer people in receipt of this benefit.
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Chart 4 – Time series analysis of proportion of residents in receipt of sickness benefit for Liverpool City Region and England Source: NOMIS
Proportion of residents in receipt of sickness benefit 18%
16%
14%
12%
10%
8%
6%
4%
2%
0% May 2009 May 2010 May 2011 May 2012 May 2013 May 2014 May 2015 May 2016 May 2017 August 2009 August 2010 August 2011 August 2012 August 2013 August 2014 August 2015 August 2016 August 2017 February 2009 February 2010 February 2011 February 2012 February 2013 February 2014 February 2015 February 2016 February 2017 November 2008 November 2009 November 2010 November 2011 November 2012 November 2013 November 2014 November 2015 November 2016 November 2017 November
Liverpool City Region England
Services are in place to support such residents into work through Jobcentre Plus, Councils, Health and Community and Voluntary Sector Providers, and these are generally effective. However, the funding available means that the scale of the support available is not sufficient to make significant impacts into the overall level of inactivity.
Universal Credit rollout and the need for more flexible learning Liverpool City Region will have a full rollout of Universal Credit by the end of 2018, and will be one of the first economic areas nationally for this to be the case. This is already beginning to impact upon wider services (e.g. welfare advice, digital development, housing), as set out in the Combined Authority’s recent Scrutiny Review. One of the requirements of being in receipt of Universal Credit is the need for individuals and households to increase the number of hours being worked, and in order to do so, they may require skills development. This will need to be flexible around timing, venue and focus to meet the different needs of such leaners.
Attainment at age 16 is significantly and persistently below national levels and inhibits the development of academic and technical skills Level 2 qualifications include National Vocational Qualifications (NVQ) at Level 2, Intermediate Apprenticeships and five GCSE grades A* to C. Schools performance at year 11 is below the national average with some areas significantly below. In contrast, Wirral has a strong record of GCSE performance, with results above the national average.
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Chart 5 – Attainment of 5 GCSEs at A*-C (including English and Maths) by Constituent Council Source: Statistical First Release
Percentage of pupils attaining 'good standard‘ of GCSEs
70 5 GCSEs at A*-C including English and Maths Attainment 8 measure 65
60
55
50
45
40
35
30 2013/14 2014/15 2015/16 2016/17
Halton Knowsley Liverpool Sefton St Helens Wirral
The lower rate of attainment of Level 2 at age 16 in the City Region compared to elsewhere has a longer term impact. The City Region does benefit from increases in Level 2 attainment between 16 and 19, with the FE sector clearly adding value, but this is not sufficient to counteract the average earlier in life lower attainment of City Region residents.
Attainment of Level 3 (NVQ Level 3 or two or more A levels equivalent) by age 19 is much lower in Liverpool City Region than national rates. The impact of lower Level 2 attainment through school and the need to repeat English and maths qualifications impacts on when Liverpool City Region residents progress to Level 3 Technical Qualifications either through academic routes such as A Levels or vocational qualifications delivered in FE Colleges, independent training providers and in work.
The opportunities for students to develop the technical skills that employers need are lost whilst students ‘catch up’ on English and maths and Level 2 qualifications, meaning that young people would need to stay in full time education for longer to make up for this and then progress to Level 3. The Combined Authority welcomes developments towards the introduction of T Levels and will be working with the Gatsby Charitable Foundation and local colleges and providers to ensure successful introduction locally.
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Apprenticeship numbers were steady overall in 2016/17, but there has been a fall in starts since the commencement of national reforms in May 2017
The implementation of funding and curriculum reforms in apprenticeships has had a detrimental impact on provision. The number of starts delivered across the City Region at the end of April 2018 equated to 48% of the prior year’s total delivery; this compared to 56% and 60% in the North West and England respectively. The gap between national and local programme delivery is widening, from 7% at Quarter 2 to 12% at Quarter 3.
Table 4 - Apprenticeship Starts to Quarter 3 2017/18. Source: Statistical First Release
Apprenticeship Starts - All Age, All Level 2017/18 Area 2013/14 2014/15 2015/16 2016/17 % 16/17 Delivery @ Quarter 3 Quarter 3 17/18
Liverpool City 16,530 17,890 18,320 18,580 8,990 48% Region North West 71,670 79,310 80,820 79,170 44,300 56% England 434,600 494,200 503,900 485,500 290,470 60%
There has been a shift in proportional delivery by age, with a higher proportion of starts being for apprentices aged 16-18: this is to be expected given the majority of 16-18 starts take place in the first half of the academic year.
Table 5 – Liverpool City Region Apprenticeship Starts to Quarter 3 2017/18 by Age Source: Statistical First Release
2015/16 2016/17 2017/18 Q.3 Quarter 3 17/18 starts as Age proportion of Starts % Starts % Starts % 16/17 starts 16-18 4,180 23% 3,720 20% 2,640 29% 71% 19-24 5,080 28% 4,940 27% 2,440 27% 49% 25+ 9,050 49% 10,000 54% 3,930 44% 39% Total 18,310 18,630 9,010
Quarter 3 data shows a proportional increase at Level 2, meaning a large number of the starts between February and April were at Level 2 but these are below the overall level of starts.
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Table 6 – Liverpool City Region Apprenticeship Starts to Quarter 3 2017/18 by Level Source: Statistical First Release
2015/16 2016/17 2017/18 Q.3 Quarter 3 17/18 starts as Level proportion of 16/17 Starts % Starts % Starts % starts L2 (Intermediate) 10,140 55% 9,540 51% 3,920 44% 41% L3 (Advanced) 6,990 38% 7,460 40% 3,890 43% 52% Level 4+ (Higher and 1,180 6% 1,630 9% 1,180 13% 72% Degree) Total 18,310 18,630 8,990
There remains a local priority on ensuring that there is a focus on apprenticeship completions as much as on starts. There is extensive support available for apprenticeships, and this needs to continue and improve.
There could be a detrimental effect on the viability of the provider base locally if the trend of falling starts is sustained. This has the potential to reduce choice for both learners and employers.
The proportion of residents without qualifications remains high, particularly for over 50s
There is a higher proportion of Liverpool City Region residents who do not have a formal qualification when compared to the national average. The 2018/2019 National Adult Education Budget (AEB) funding rules has included a pilot to fully fund learning for those working at or below a wage of £15,736.50. The Combined Authority will look to the findings of this pilot in considering how those with low skills and low pay can benefit from the AEB following devolution.
Chart 6 – Population (aged 16-64) with no qualifications in Liverpool City Region and elsewhere
Proportion of residents without a qualification 0.25
0.23
0.21
0.19
0.17
0.15
0.13
0.11
0.09
0.07
0.05 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Liverpool City Region England
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Table 7 – Liverpool City Region residents without formal qualifications (Dec 2018) Source: ONS Annual Population Survey, NOMIS Age 16-24 25-29 30-39 40-49 50-64 Overall Proportion 9.4% 7.4% 8.3% 10.9% 15.9% 11.3%
The forthcoming Skills for Growth Action Plan for English and Maths will identify potential improvements in the teaching and learning approaches to improve their effectiveness. Targeted, specific and sustained efforts are required to increase engagement in learning and progression to higher levels to narrow the qualification gap as part of outreach. In addition, the model of teaching and learning may need to change to reflect the work and life patterns of many people who need to develop such skills.
The proportion of residents with mental health issues is rising
There is consistent anecdotal feedback from services and providers that the nature of the issues faced has changed in recent years, and that residents accessing support tend to have more and more complex barriers that prevent them from working: this includes those with a mental health condition. This is accompanied by similar feedback from employers that they are having to provide more support to employees around managing mental health issues and pressures in the workplace.
There remains a need for continual professional development of College and independent training provider staff to support learners that experience mental health issues. Providers should ensure that their staff are kept up to date on mental health issues and referral points to relevant healthcare provision as appropriate.
Barriers to learning and engagement need to be identified and addressed
Many people have different barriers which prevent them accessing learning opportunities: these include:
• Financial – unable to afford the provision; • Travel – unable to get to the physical premises; • Childcare – unable to find affordable or accessible care for the children and young people for whom they are responsible; and • Provision – unable to find the courses they need or at a time they can access them.
Additionally there are self worth barriers which prevent people from admitting that they need help with their basic or functional skills, and as a result will not consider accessing provision or support. Practical barriers are easier to deal with but wider motivation issues also need to be addressed and practitioners need to be aware of the latest research (e.g. Behavioural Insights work1, Unionlearn research2, Department for Education research3).
As detailed earlier the Combined Authority will look to the findings of the current Adult Education Budget national pilot to fully fund the learning of low paid (below £15,736.50) learners in work. The Combined Authority will also extend the current subsidised travel available to 16 to 18 year olds through ‘My Ticket’ to Apprentices aged 19-24.
1. Retention and Success in Maths and English, Behavioural Insights Team http://www.behaviouralinsights.co.uk/wp-content/uploads/2018/02/ASK-guide-27-Feb-1.pdf 2. Tackling Disadvantage, Unionlearn Page 100 https://www.unionlearn.org.uk/publications/tackling-disadvantage-unionlearn-effect-opening-learning-and-skills 3. Barriers to learning for disadvantaged groups, Department for Education, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/735453/Barriers_to_learning_-_Qualitative_report.pdf Skills Investment Statement 2019-2020 19
A clear barrier is also the knowledge about learning opportunities and the need for impartial advice as to which is the most suitable and beneficial opportunity for an individual. The Combined Authority has begun to develop progression pathways for sectors, and these will be added to with relevant careers materials.
Work readiness is generally good but employers suggest a need for improvement for recruits to Health & Care, Visitor Economy and Manufacturing sectors
The perceptions of work readiness of new recruits across all employers are generally high at 83%, which is slightly above the nationally recorded level of 78%. There were a number of differences in the perceived work readiness of new recruits based upon their experience as below:
Table 8 – Work readiness by recruitment type (selected) Source: 2017 Liverpool City Region Employer Skills Survey
Recruitment type Prepared for Not prepared for work work Long term unemployed people 62% 38% Those new to employment 64% 36% School leavers 58% 42% Experienced/skilled workers 97% 3%
A sectoral analysis found that these work readiness gaps were most pronounced in the Health and Care, Visitor Economy and Manufacturing sectors. This suggests that there are gaps in employability provision for these sectors, and this can be more tailored and effective. The specific support provided through Sector Based Work Academies allows people to gain experience of work and develop the skills that are needed. These need to be delivered more flexibly and become more responsive to employer needs in line with their recruitment plans.
This must be balanced with the need to improve the quality of jobs, particularly in sectors where there are high proportions of entry level roles: the Combined Authority will be consulting on the Fair Employment Charter in Autumn 2018 which employers will be encouraged to sign up with a range of commitments to deliver fair employment for staff.
Employers have specific skills gaps in a range of roles and sectors
The sector focused Skills for Growth Action Plans are identifying in detail the specific skills gaps that are in place across employers, and the joint action that employers and providers need to take in addressing those gaps. The summary of those Action Plans completed to date is attached as Annex One.
Page 101 20 There remains a need for colleges, independent training providers and universities to offer flexible and tailored provision to meet the needs of employers and learners. This could include pre-employability training to enable recruitment in hard to fill vacancies through routes such as traineeships, sector based work academies or other pre-employment support. Initial feedback from the Skills for Growth Service shows that employers value its flexibility and adaptability to their needs, as well as the support offered by independent skills brokers.
National evidence is also suggesting that the issue may be as much about skills utilisation as much as it is about skills availability although there are issues around this4. There are some job roles and sectors whereby there are sufficient numbers of people being trained but these skills are not being deployed in those sectors e.g. good numbers of students may be studying Engineering degrees but then not going into Engineering roles. Employers need to consider a broader approach to utilising the skills in their organisations and may need to consider how these are deployed.
The Combined Authority looks forward to the rollout of the National Retraining Scheme for Digital and Construction skills related roles and indeed the role T Levels will have in offering work experience and technical skills needed by local employers.
Leadership and Management provision needs to be made more available and flexible to meet the needs of different types of employers
Leadership and management remains an issue with 25% of employers identifying this as a specific skills gap in their current workforce and 10% identifying it as a skills gap for new recruits: this is most pronounced on both elements for larger employers. In addition, 20% of employers reported that Chief Executive and Senior Management roles would be most affected by future demand for new skills. This is most acute for micro sized employers where 26% identified a need for these skills in future years. Level 4+ Apprenticeship delivery to Liverpool City Region residents has risen between 2015/2016 and 2016/2017, from 400 to 690 starts.
Further help needs to be provided to residents who have do not have English as a first language
Colleges, Community Learning Providers and Independent Training Providers continue to report consistent anecdotal feedback on English as a Second Language (ESOL) activity. The funding associated with this provision means that class sizes can be relatively large and as a result, there are a range of learning needs and backgrounds which can lead to sub optimal outcomes. Initial views from providers suggests that additional funding needs to be added to enable small groups to be economic, which would also improve learning outcomes. In addition, local stakeholders have consistently fed back that the absence of a timely diagnostic of the specific level of ESOL needs acts as a barrier to learners accessing the most appropriate level of provision.
Careers activities require further cohering and co-ordination
There is consistent and widespread feedback from employers and stakeholders that the way in which careers services are currently procured and operated is not effective: the Combined Authority shares this view. The chart overleaf shows the range of different organisations who are involved in the development of careers materials or offering advice and guidance to individuals.
Page 102 4. Skills Shortage Bulletin, Edge Foundation http://www.edge.co.uk/sites/default/files/documents/skills_shortage_bulletin_2_final_1.pdf Skills Investment Statement 2019-2020 21
Chart 7 – Organisations involved in careers activities locally
The Combined Authority has established the Careers Hub to cohere these activities, and this has begun to do so. The development of an initial set of sector based progression pathways, delivery of the Skills Show at the IFB 2018 and the focusing of support onto schools who require it most show the impact that the Hub can deliver. However, its ability to do this is limited and based around goodwill rather than any compulsion or requirement to attend or get involved. Discussions are continuing with Government about how this disjointed system can be improved, and in the meantime, the Careers Hub will continue to cohere the production of materials locally so at least these can be used consistently. As new contracts are put in place by Government to deliver careers services in the Liverpool City Region, we will work to agree performance indicators and investment priorities that reflect our local priorities and maximise the benefits for our local residents.
Page 103 22 Actions for immediate implementation
This Skills Investment Statement 2019/2020 sets out the issues that the City Region faces and proposes the following actions to be implemented to address them:
Improve attainment in English, maths, digital and work readiness Schools should ensure that more pupils are able to gain Level 2 qualifications at age 16 and collaborate more on the implementation of effective practice in appropriately targeted and differentiated interventions and support based on learner needs; Combined Authority to complete the Skills for Growth Action Plan on English, Maths and employability skills and share this learning widely; Colleges, Community Learning Providers and Independent Training Providers to trial different approaches to engage learners who need to develop require maths, English, particularly for those who over 50s; Cohere the development of careers materials and delivery of careers provision across the City Region through the Careers Hub; Support the development and delivery of the Schools Careers Hub and ensure that the learning is spread widely; Combined Authority to work with Jobcentre Plus and Local Authorities to ensure ESOL provision has consistent quality initial assessment and delivery; Combined Authority and LEP Digital and Creative Board to establish Digital Skills Partnership to implement the recommendations of the Digital Skills for Growth Action Plan; and Combined Authority to consider the digital skills needs and accessibility of skills through digital mediums ahead of the digital entitlement in 2020/21.
Raise working age employment rate and improve the proportion of good quality jobs Combined Authority to ensure that jobseekers are able to access training and work experience opportunities through the commissioning of more Sector Based Work Academy places; Colleges and independent training providers to ensure that skills provision for unemployed people is flexible and meets the needs of learners and employers; Combined Authority to continue to deliver the innovative Households into Work Programme and ensure that learning is disseminated widely; Colleges and Independent Training Providers to agree arrangements to secure greater alignment between Traineeships, Apprenticeship and Adult Education Budget provision linked to progression pathways; Combined Authority to commission provision to narrow specific employment gaps around black and ethnic minority groups and disabilities; and Jobcentre Plus to utilise funding through Flexible Support Fund to commission additional support to help unemployed people into work.
Higher productivity and fewer skills shortages in growth sectors Colleges, Independent Training Providers and Universities to implement the findings of the sectoral Skills for Growth Action Plans; Universities to explore the potential for further employability programmes to link closely with local employers; Combined Authority to work with Colleges and Independent Training Providers to support the implementation plans for T levels; Support employers through the Apprenticeship Hub to access apprenticeships as a workforce development and skills investment solution; Skills Commission to identify and support groups of employers in key sectors to better aggregate demand for Skills Investments, particularly in key sectors such as Health and Care, Construction and Digital; Combined Authority to facilitate the extension of sector based Skills Networks (drawing together employers and colleges and independent training providers) to ensure that all growth sectors are covered; and Colleges, Independent Training Providers and Universities to ensure that skills provision for employed people looking to progress is flexiblePageand can 104be accessed at different times and through different methods; Skills Investment Statement 2019-2020 23
More effective workforces and fewer local recruitment difficulties across all employers Careers Hub to develop and publish more detailed progression pathways reflecting job roles and learning options; and Employers from Digital, Construction and Manufacturing need to articulate more effectively their specific technical skills needs to colleges and independent training providers: this can be organised through the LEP Sector Boards and College and Independent Training Provider Curriculum Networks in addition to the Skills for Growth Reports; Combined Authority to encourage the provision of sector based work academies and other pre- employment support aligned to local recruitment needs.
Employers are investing more in the skills of their workforces Combined Authority to review the Skills for Growth Brokerage services and ensure that independent employer brokerage on skills is available to local employers; Colleges, Independent Training Providers and Universities to review their leadership and management provision to ensure that it is flexible and meet the needs of all employers; and Combined Authority to consider the findings of the 2018/2019 National AEB funding rules fully funded skills provision pilot for those with low skills and low pay.
Simplifying the skills system Combined Authority to commission Adult Education Budget from 2019/2020 in line with stated priorities to meet the needs of learners and employers; Combined Authority to work collaboratively with strategic partners to align the devolved Adult Education Budget funded provision in Liverpool City Region with other adult funding streams to ensure they complement the wider learning experiences of residents; and Combined Authority to oversee commissioning of remaining ESF and Skills Capital funding in line with stated priorities.
Apprenticeships Combined Authority to commission additional ESF funding to support the promotion and take up of apprenticeships as set out in the Apprenticeship Growth Plan; Combined Authority to implement the Apprenticeship Application Portal, making it easier for people to apply for apprentices; and Combined Authority to continue to lobby Government for changes to the apprenticeship funding system to allow for necessary local flexibilities;
Capacity building measures Providers should ensure that their staff are kept up to date on mental health issues and referral points to relevant healthcare provision as appropriate; Ensure that providers further develop their capacity to respond to current and future learner entitlements, in particular maths, English and digital.
Page 105 24
Annex One
Summary of Skills for Growth Action Plans
Health and Care Health and Care covers 21% of the employment within the City Region, with around 120,000 people employed. The workforce is ageing, and there are specific issues around skills and recruitment needs in Social Care and in a number of specialist health roles in particular. For social care, this builds upon wider issues in the sector with inflationary pressures on employment whilst pressures to reduce costs remain.
The recommended actions focus on the need to improve the promotion of the sector and the roles within it, as well as ensuring that staff can take advantage of the training available. There is also a key role for Trades Unions to promote access to learning and development.
Construction Construction has contributed over £25bn to the City Region over the last 20 years, and currently 47,000 people work in the sector. There are strong grounds for optimism, and growth of 2.3% is forecast for the next 5 years. However, there are specific shortage roles (including bricklayers, painters and decorators and building envelope specialists) which need collaborative action to address. This will be taken forward by industry groups, led by CITB.
Visitor Economy The Visitor Economy generated £4.2 billion in GVA in 2016, accounting for nearly 14% of the total for the City Region and nearly 52,000 jobs. 25% of the Visitor Economy workforce is aged 16–24, more than double the proportion of young people in the City Region’s workforce as a whole, and there are grounds for further growth in the coming years. There is a need to encourage more uptake of provision, prepare them for careers in the sector and promote more investment in skills by employers.
Low Carbon The Low Carbon Economy is a key growth sector with potential for significant growth in both the number of employees and the number of enterprises. The sector encompasses a diverse range of skilled semi-skilled trades, particularly within manufacturing. There are particular City Region strengths (e.g. offshore wind) and opportunities (e.g. hydrogen, tidal energy) which can be built upon and captured. There is a need to increase the number of young people entering the sector, capitalise on changing trends towards low carbon energy efficiency and improve workforce skills.
Page 106 Skills Investment Statement 2019-2020 25
NOTES:
Page 107 www.liverpoolcityregion-ca.gov.ukPage 108 Agenda Item 9
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE PROJECT DIRECTOR – ADULT EDUCATION BUDGET TRANSITION
ADULT EDUCATION BUDGET COMMISSIONING PLAN
1. PURPOSE OF REPORT
1.1 This report provides an update for the Combined Authority on progress relating to the devolution of the Adult Education Budget in the 2019/20 academic year. It sets out the proposed commissioning approach for Liverpool City Region’s devolved Adult Education Budget, including the procurement timeline.
2. RECOMMENDATIONS
2.1 It is recommended that the Combined Authority:
a) Approve the proposed commissioning approach for Liverpool City Region’s devolved Adult Education Budget as set out in Sections 4-7 of this report; b) Authorise officers to enter into a negotiated grant commissioning process for 2019/20 with the indigenous Liverpool City Region Colleges and Local Authority providers currently grant funded by the Education and Skills Funding Agency, as listed in Appendix One; c) Agree to procure contracts for services for all other providers, including Independent Training Providers, Further Education institutions based outside of the Liverpool City Region and other organisations (which may include the voluntary and community sector) and to commence this process; d) Support the opportunities devolution provides to implement innovation and greater local flexibility in Adult Education Budget provision, as noted in Section 6 of the report and detailed in Appendix Two; e) Note the procurement timeline for contracts for services outlined in Section 8 of the report; f) Approve the retention of circa 2% of the overall budget to support the Combined Authority’s local strategic planning, operational management and assurance of the Adult Education Budget post devolution, pending confirmation of the final budget from the Department for Education; and
Page 109 g) Request an update on progress at the Combined Authority meeting on 11 January 2019.
3. BACKGROUND
3.1 Devolution of the Adult Education Budget (AEB) was agreed in Liverpool City Region’s Devolution Agreement of November 2015. In July 2018, the Combined Authority and its six constituent Councils gave formal consent to the Order which will transfer the AEB functions, including a range of statutory obligations, to the Combined Authority from 1 August 2019. Following confirmation from the Secretary of State that local readiness conditions had been met by the Combined Authority, the Order was subsequently laid in Parliament prior to the Summer recess and it will be debated in both Houses during Autumn 2018.
3.2 Local strategic and operational preparations for devolution are ongoing in parallel to the legislative activity, overseen by a Combined Authority Project Board (including the Director of Policy and Strategic Commissioning, Director of Corporate Resources and Monitoring Officer). This report provides an update on proposals for the Combined Authority’s commissioning approach.
3.3 The AEB is a single revenue stream that brings together adult further education (all provision for those aged 19 years and over with the exception of Apprenticeships and Traineeships), community learning and discretionary learner support. Its principle purpose is defined by the Education and Skills Funding Agency (ESFA) as being “to engage adults and provide them with the skills and learning needed for work, an apprenticeship or further learning”. AEB also includes a guarantee to fund statutory learner entitlements relating to English, maths and (from August 2020/21) digital skills, as well as a first Level 2 qualification and Level 3 for those aged 19 to 23 years. These statutory entitlements currently account for circa £13m of the overall budget.
3.4 Alongside other Mayoral Combined Authorities who will be responsible for devolved AEB from 2019/20, Liverpool City Region has negotiated access and use of the current national funding rates for qualifications and learning aims. The Combined Authority has the ability through devolution to change these funding rates to better meet local priorities. Managed change over time will enable short to medium term continuity of funding and certainty for providers.
3.5 The Department for Education (DfE) has issued an indicative budget for Liverpool City Region in 2019/20 of circa £52m, but the final figure will depend upon learner participation in 2017/18.
4. COMMISSIONING APPROACH
4.1 The Combined Authority has set out the strategic ambition for the AEB in the Liverpool City Region Skills Strategy 2018-2023. Local devolution of AEB will help to ensure providers’ skills offers meet local employer and learner needs,
Page 110 including those furthest from the labour market. Devolution will enable adult skills provision and learning to be more flexible and agile in its application.
4.2 A soft market testing exercise to inform the commissioning of AEB provision was undertaken during August 2018 when a short questionnaire was published on the e-tendering portal The Chest. This allowed all interested parties to respond to an open invitation and attracted responses from range of Colleges, Local Authorities and Independent Training Providers. In addition, a Market Engagement workshop was held on 20 August 2018 for providers and stakeholders to learn more about the plans for AEB devolution and understand the Liverpool City Region’s skills priorities. This event was well attended with over 129 attendees representing 74 organisations.
4.3 The commissioning approach is underpinned by a clear set of delivery principles designed to convey clarity, transparency and quality and provide the basis on which healthy dialogue and challenge can exist between the Combined Authority (as Commissioner) and providers. These are:
Local skills investment priorities will be aligned to Skills Strategy outcomes; The Combined Authority will align, where possible, with national policy on funding eligibilities, rates and entitlements and will seek to improve or enhance these in support of local priorities as appropriate; The Combined Authority will encourage new market developments to ensure there is a mixed economy of commissioned services and innovation that strengthens the local provider base and responds to needs and opportunities; Skills funding decisions including European Social Fund and Skills Capital will be considered alongside the AEB; Sub-contracting will be agreed where this adds value to the mix and balance of provision locally and enriches the learning offer; and Allocations and details of commissioned provision will be openly published to ensure transparency of process.
4.4 It is proposed that the Combined Authority adopts a dual approach to commissioning1 the devolved AEB. This will involve a combination of grant funding agreements and procured contracts for services. The key considerations for each approach are set out below:
4.5 The Combined Authority establishes grant funding agreements with Further Education (FE) Colleges based in Liverpool City Region and Liverpool City Region Local Authorities which currently deliver AEB funded provision, on the grounds that:
They form part of Liverpool City Region’s state-maintained system of public education and its associated asset base and infrastructure which is
1 For the purposes of the AEB, the term ‘commissioning’ relates to the processes by which AEB funded provision will be planned, purchased, managed and monitored.
Page 111 funded wholly, or mainly, from the public purse and which has Liverpool City Region residents and ‘place’ as the primary focus of their activity; These providers cannot choose not to engage with policy changes, nor can they substantially shift their core business focus or suddenly cease operating; the FE regulatory framework and FE insolvency regime recognise the particular position/status of colleges and provide additional protection for learners which does not apply to learners in other institutions; A Memorandum of Understanding between DfE and the Combined Authority will explicitly require the Combined Authority to “minimise the risk of insolvency of any further education institution in the CA area”; and They will be subject to stronger performance management arrangements than currently set out via the ESFA.
4.6 All other providers that wish to deliver Combined Authority funded provision to Liverpool City Region residents from 2019/20 will be required to participate in a competitive tender in accordance with the Public Contract Regulations for a contract for services. Whilst we do not want to limit learner choice or exclude valuable specialist providers and niche provision from the market, it would be difficult for the Combined Authority to work with the current provider base of 220 in its entirety from an efficiency perspective. Managing a high number of contracts of this order would not provide value for money from public funding. Procurement will encompass (but is not limited to):
Independent Training Providers (ITP) and voluntary and community sector organisations: o Currently these tend to operate under contracts for services with the ESFA, to which the Public Contracts Regulations 2015 (Light Touch Regime) applies; o Whilst recognising that these providers are subject to Ofsted inspection and that some operate on a ‘not for profit’ basis, they generally have different commercial status and more autonomy over their policy/business focus than colleges and local authorities; and o Different regulatory arrangements apply, in that non-FE institutions are outside of the purview of the FE Commissioner and the new FE insolvency regime.
Grant Funded organisations whose main base of operations is outside of Liverpool City Region. o A total of 131 grant funded organisations based outside of Liverpool City Region received circa £4m of grant funding from the ESFA to deliver AEB provision to Liverpool City Region residents in 2016/17, but not as their core business and sometimes this is delivered through sub contracted arrangements. Procuring this provision will allow the Combined Authority to realign the funding currently spread across a vast national provider base and refocus it for Liverpool City Region residents, as well as maximising the impact for learners by reducing management fees and unnecessary subcontracting.
Page 112 4.7 It should be noted that, whilst legal advice from the DfE has confirmed that Mayoral Combined Authorities (MCAs) are able to continue to grant fund providers if they so wish, they are not obliged to do so, including where a provider is currently grant funded by the ESFA. The decision as to whether to grant fund or procure provision from Independent Training Providers, for example, is a policy decision for the Combined Authority, and MCAs may set different criteria and thresholds for how they choose to commission.
Recommended Commissioning Approach
4.8 The Liverpool City Region Combined Authority is recommended to enter into a negotiated grant commissioning process for 2019/20 with the indigenous Liverpool City Region Colleges and Local Authorities currently funded through an ESFA grant funding agreement as detailed in Appendix One. This approach will secure provision estimated to be circa £30-£35m of an expected £52m budget and makes up the largest proportion of activity funded through the devolved AEB.
4.9 Discussions will commence from November 2018 with the identified grant funded providers. They will be asked to submit delivery plans as part of the allocations process, setting out their curriculum offer, including how this meets the City Region’s identified skills priorities, delivery models etc. Indicative allocations will be issued by the Combined Authority in early 2019, with final allocations agreed by the Combined Authority and confirmed in April 2019.
4.10 Circa £10-15m will be available to competitively tender for AEB contracts using the Public Contracts Regulations 2015 ‘Light Touch Regime’ (for education and training services). This approach, operated alongside the negotiated grant funding approach with indigenous Colleges and Local Authorities, minimises risk to continuity of provision for learners in the short term, whilst offering providers an opportunity to apply for funding. It also provides the opportunity to assess provider capability and capacity to deliver the Combined Authority’s skills priorities.
4.11 The commissioning approach will include two themes of activity for each College, Local Authority and Independent Training Provider to consider:
Theme 1: Comprehensive skills support to all residents including statutory entitlements (this is expected to form the majority of the providers’ AEB funding allocation); and Theme 2: Innovative, smaller test and learn pilots.
4.12 It is recommended circa 2% of the overall AEB budget will be retained by the Combined Authority to support the administration, management, payment process and assurance of the AEB, in accordance with the Memorandum of Understanding between the DfE and the Combined Authority.
4.13 Any residual funding which remains following commissioning will provide a small reserve which might support activity such as, responding to in-year
Page 113 growth requests or urgent need based on sudden changes in the employment landscape.
4.14 As noted earlier, 220 providers across England currently deliver AEB funded provision to Liverpool City Region residents. Introduction of a minimum contract value will ensure that economies of scale can be applied and the Combined Authority staff resources can effectively manage the provider relationships required. £0.100m is a well-recognised minimum contract value benchmark currently adopted by the ESFA in their contracting approach. This threshold was also supported as part of our recent market testing. However, it is anticipated that the majority of provider allocations will be higher than the proposed £0.100m minimum contract value.
4.15 Discussions are also underway with ESFA and other MCAs to plan for and minimise the impact of any issues arising in relation to Liverpool City Region learners who have enrolled at providers which will not have funding arrangements with the Combined Authority in the future. These will mainly be cross border areas, in particular Greater Manchester, Lancashire and Cheshire and Warrington.
Sub-contracting arrangements
4.16 Sub-contracting has an important role to play in the delivery of the AEB. Subcontractors can help widen participation amongst niche groups that would otherwise be hard to reach. Subcontracting also provides an entry point to funding for smaller voluntary and community sector (VCS) and niche providers, where they may not otherwise be able to meet the minimum contract value.
4.17 The fees charged by lead providers to those they sub-contract with should be transparent. Fees should be proportionate to the services offered by the lead provider, recognising there may be a sliding scale for varying levels of support for managing the sub-contract relationship and associated risks, data processing, access to internal audit support, quality assurance and improvement, classroom observations and accreditation support. The market engagement event widely supported the view that 20% of the sub-contractor’s earnings from learning should be a maximum amount charged by lead providers. Any sub-contracting proposals will be reviewed by the Combined Authority both as part of the negotiated grants discussions and provider responses to the tendered provision. We will also monitor the value for money and quality of such provision as part of our approach to performance management.
4.18 All sub-contracts must be agreed with the Combined Authority prior to any learning commencing as part of lead provider due diligence arrangements. This will enable the Combined Authority to understand the learning it funds and better ensure the level of funding spent on sub-contract support infrastructure is proportionate to costs.
5. LANDING AND EMBEDDING TRANSFORMATIONAL CHANGE
Page 114 5.1 The Combined Authority has set out the strategic ambition for the AEB in the Liverpool City Region Skills Strategy 2018-2023. However, moving from this strategic intent to implementing tangible outcomes for learners is an ambitious, long-term journey and will require changes in behaviours and practice of providers.
5.2 Key actions planned for 2019/20 will include evaluating and sharing local good practice of monitoring learner journeys, with a focus on tracking positive outcomes for individuals and learner progression alongside the achievement of learning aims. This will require the Combined Authority to adopt a more proactive approach to provider relationship management than is currently the case from the ESFA. Other changes will include creating a strategic dialogue with grant funded providers for whom the current ESFA regime is generally focused on financial management rather than on strategic planning.
5.3 The initial impact of AEB will be to begin the cultural and systemic shift which lays the foundations for future transformation by:
Focusing on positive outcomes for individuals and tracking learner progression, rather than simply measuring delivery and achievement of learning aims; Beginning the shift towards funding learning on a forward-looking basis rather than on the basis of historical activity; Testing new flexibilities and innovation through ‘test and learn’ projects which could, for example, trial new payment models, rates and eligibility for specified activity, pilot niche provision or delivery models, and scale up existing activity for particular cohorts of priority learners/employment sectors (see Section 6 and Appendix Two); Understanding the different Community Learning models of delivery across the City Region in delivering first step informal learning to those furthest away from the labour market; and Promoting stability of the Liverpool City Region’s FE sector, within a post-16 skills system which has absorbed significant changes in the period leading to AEB devolution, recognising the impact on providers of the forthcoming rollout of technical education reforms and the ongoing embedding of apprenticeship reforms.
5.4 For any type of change to succeed, especially the step change outcomes required through devolution, there needs to be significantly better engagement from employers; greater synergies, strategically, between funding streams and greater collegiate working at both a strategic and operational level between all providers. Building a strong relationship management function into the Combined Authority’s AEB team will help to provide the impetus and knowledge to make this possible.
6. INNOVATION AND LOCAL FLEXIBILITY
6.1 A number of local flexibilities and innovations are being consulted upon for inclusion within local AEB funding rules from 2019/20 as ‘test and learn’ activity. They are intended to deliver positive outcomes detailed in our Skills
Page 115 Strategy, such as the need for greater inclusion of those aged over 50 and unemployed in the labour market or to better stimulate a market response from providers to employer need. The flexibilities are also intended to help build a package of wrap-around support that goes beyond qualifications for those residents with complex needs and ensure a stronger emphasis on progression to further learning or employment.
6.2 In all cases, these local pilots would need to demonstrate that they do not duplicate existing provision, such as that being delivered through ‘mainstream’ skills funding, Jobcentre Plus or ESF, including the Ways to Work programme. Areas for change include:
Preparations for the digital entitlement – pre 2020 pilots; English for Speakers of Other Languages; English and maths pilots; Sector based work academies / Pre-employment routeways; Fully funded learning for individuals in receipt of low wage; Impartial independent skills brokerage with employer grants; Enterprise skills; Capacity building providers through continuous professional development; and Changes to funding rates and funding new qualifications and learning.
6.3 Further details on these areas for change are provided in Appendix Two of this report.
7. PROCUREMENT
7.1 The procurement exercise to award contracts for services will be a restricted procedure with a two stage evaluation process in accordance with the Public Contract Regulations 2015. Organisations that pass the selection stage will be invited to submit their proposals for delivering a quality service.
7.2 The Invitation to Tender (ITT) will be split into two themes:
Theme 1: Comprehensive skills support across Liverpool City Region to support all residents to:
o Acquire basic skills; o Progress into/within learning; o Acquire and sustain employment/apprenticeship/traineeship; o Progress in employment; and o Gain employment in sector specific learning.
Theme 2: Innovative smaller projects that secure positive outcomes and test innovative delivery models for priority cohorts and sectors as outlined in Section 6. Provision under this theme will provide more targeted support for cohorts such as residents aged 50 plus, hard to reach groups, those looking to retrain and return to the labour market after an absence or learners from black and minority ethnic backgrounds. This
Page 116 provision must add value to, rather than duplicate, other services targeting these cohorts.
Social value
7.3 The Combined Authority has made a level 1 commitment to consider the principles of social value in its procurement and commissioning approach. Social value will therefore be considered during the AEB procurement process and through the negotiations with grant funded providers. The Combined Authority will value and increase the amount of high-quality provision that enables all learners to gain the skills and learning needed to move closer or into work. Applying social value principles will help organisations become more accountable for what happens as a result of their work and will be considered throughout the whole AEB business cycle.
Timeline
7.4 Key dates for the procurement of contracts for services are: Activity Date Publish OJEU Notice (Restricted Process) Early November 2018 Launch of Standard Qualification Early November 2018 Questionnaire (SQ) Closing date for return of SQ November 2018 Issue Invitation to Tender on the Chest Mid-January 2019 Closing date for return of procured tenders Late February 2019 Evaluation February-March 2019 Issue OJEU award notice April 2019 Contracting/on-boarding with providers May-July 2019 Contract commences 1 August 2019
8. RESOURCE IMPLICATIONS
8.1 Financial
The devolved AEB budget for Liverpool City Region is anticipated to be circa £52m per year from academic year 2019/20. The final figure will depend upon learner participation in 2017/18 and will be confirmed by the DfE in early 2019.
There will be no separate administration budget from DfE to support the ‘steady state’ operating costs associated with devolution of the AEB after the implementation phase. However, DfE have confirmed that the Combined Authority will be able to resource the management of AEB locally from within the devolved budget. As a result, the Combined Authority must retain a proportion of funds from which the strategic management, administration and assurance of the budget will be resourced. This will also cover the specialist technical support required across a range of specialisms and ensure the Combined Authority meets its legal obligations around the secure and legally compliant processing and storage of learner data.
Page 117
It is envisaged that no more than 2% of the overall budget will used by the Combined Authority for administrative purposes, although this figure will be kept under review pending confirmation of the final AEB budget.
The AEB procurement approach, as part of the assessment stage, will include a robust due diligence process to ensure potential delivery partners are financially stable to sufficiently deliver the proposed grant/contract award and that there are no apparent eligibility issues from the onset of the process.
8.2 Human Resources
There are Human Resources implications arising from the implementation of the recommendations in this report. The Combined Authority will need to ensure that it has sufficient capacity to undertake a range of essential planning, contract monitoring/performance management and assurance functions. In addition, Grant Funding Agreement and Contracts for Services currently used by the Combined Authority for Single Investment Funds will need to be adapted for AEB with a resource implication.
The procurement process for private sector independent training providers and other providers who mainly operate from outside of the Liverpool City Region will be resource intensive and will require that additional staff capacity is deployed or short-term secondments identified and secured to ensure effective and timely results.
8.3 Physical Assets
There are no direct Physical Assets implications arising from the implementation of the recommendations in this report.
8.4 Information Technology
There are no direct Information Technology implications arising from the implementation of the recommendations in this report. Procurement will use current procurement IT systems used by Merseytravel and the Combined Authority constituent Councils – The Chest: North West Procurement Portal.
9. RISKS AND MITIGATION
9.1 Risks and mitigation of identified risks are included on the next page: Risk Mitigation
Page 118 The Combined Authority does not The Combined Authority adopts a agree a commissioning approach for procurement approach that mirrors the AEB or agrees an approach that the current approach taken by the could be open to legal challenge. ESFA. This is based on the legal advice offered by the DfE and within the constraints of the devolved funding. The final devolved AEB allocation will The Combined Authority will work to only be confirmed by the Department the illustrative budget of £52m for Education, as late as January 2019. provided by the Department and This means that the final budget issue indicative allocations to available for AEB procured provision Colleges, Local Authorities and cannot be confirmed until then. providers until the devolved amount is confirmed. Risks may arise from a particularly A Combined Authority Adult tight timescale to implement the AEB Education Budget Team is being commissioning process. There are a established to provide dedicated significant number of AEB procurement support to implement the AEB documents to be finalised during preparations. The Team will work October 2018. closely with colleagues in Corporate Services who are supporting the commissioning process. The volume of tenders received for Additional procurement resources AEB contracts may be substantial. have been sourced from Knowsley There is a risk that there is insufficient Council to support the Combined Authority resource to score commissioning process. tenders within the current timetable to award contracts. The number of actual tenders and The mitigation for this is that grant eventual contract awards can also only funded College and Local Authority be estimated. This may result in a provision will be agreed outside of need to secure additional resources the procurement process as outlined before, during or after procurement, in our commissioning approach. and/or may require the award of the AEB contracts to be delayed. Introducing a new approach to funding The Combined Authority will engage and contracting may take time to with providers to ensure a smooth embed and as a consequence there transition towards delivering the could be a reluctance by some devolution priorities and maximising providers to submit a tender to deliver impact in Liverpool City Region. This AEB to learners in the Liverpool City includes a programme of planned Region in 2019/20. market engagement activities.
Page 119 Delivering the innovations funded by The Combined Authority has met the devolved AEB, together will a more with Ofsted to alert them of a targeted focus to those residents most potential shift in funded priorities and in need of publicly funded learning the potential impact this may have on such as over 50s with low level skills, Liverpool City Region achievement low paid and skilled learners and those rates and suggested this is taken into who are economically inactive may consideration at inspections. have an adverse impact on overall skills achievement rates for providers operating in the City Region.
10. EQUALITY AND DIVERSITY IMPLICATIONS
10.1 The AEB aims to improve opportunities for people who are in need of new skills and learning opportunities. Many potential AEB learners also have protected characteristics. The AEB commissioning proposals will support a range of under-represented groups, particularly the most disadvantaged residents, including those without basic skills, unemployed people, over 50s, single parents, black and minority ethnic groups and disabled people. The pilots outlined in this report also seek to support residents in low paid/low skilled jobs.
10.2 Colleges, Local Authorities and providers delivering devolved AEB funded provision will be expected to report on equality and diversity impact measures. These will focus on narrowing gaps in skills participation and achievement for black and minority ethnic groups, under-represented genders in particular sector subject areas, and learners with learning difficulties and/or disabilities. The Combined Authority will ensure participation, retention and achievement for underrepresented learners is proportional to local area demographics.
10.3 These commissioning proposals have been subject to an Equality Impact Assessment. A copy can be provided on request.
11. COMMUNICATION ISSUES
11.1 A full communications approach has been developed locally and implemented with market engagement of providers, Colleges and constituent Councils. In addition, a joint MCAs/DfE communications brief has been developed to ensure that providers are clear about nature of these changes, the direction of travel and the need to engage with MCAs.
Page 120 12. CONCLUSION
12.1 This report outlines Liverpool City Region Combined Authority’s approach to implementing the devolved Adult Education Budget. It recommends approval of a commissioning approach and principles to guide the Combined Authority’s adult skills investments from 2019/20. It also identifies the opportunities for innovation and greater local flexibility in skills and learning provision as a result of devolution.
SUE JARVIS Project Director - Adult Education Budget Transition
Contact Officers: Neil Maguire (0151 330 1254) Alison Gallagher (0151 330 1415)
Appendices: Appendix One: Indigenous Liverpool City Region Colleges and Local Authority Grant Funded providers Appendix Two: Adult Education Budget funded Innovation and Local Flexibility
Page 121 APPENDIX ONE
INDIGENOUS LIVERPOOL CITY REGION COLLEGES AND LOCAL AUTHORITY GRANT FUNDED PROVIDERS
Liverpool City Region Indigenous Education and Skills Funding Agency (ESFA) grant funded providers:
Local Authorities Further Education and 6th Form Colleges Knowsley Metropolitan The SK College (merged St Helens and Borough Council Knowsley College) Liverpool City Council Hugh Baird College (now merged with South Sefton Sixth Form); Sefton Metropolitan Southport College (now merged with KGV Borough Council Sixth Form College) Halton Borough Council Wirral Met College St Helens Metropolitan Riverside College Borough Council Wirral Metropolitan The City of Liverpool College Borough Council Mysercough College (for Liverpool City Region learner activities) Birkenhead Sixth Form College Carmel Sixth Form College
Page 122 APPENDIX TWO
ADULT EDUCATION BUDGET FUNDED INNOVATION AND LOCAL FLEXIBILITY
A number of local flexibilities and innovations are being consulted upon for inclusion within the Adult Education funding rules from 2019/20 as ‘test and learn activity. These are as follows:
Preparations for the digital entitlement – Pre 2020 pilots
Digital skills are vitally important to the economic success of Liverpool City Region, as they become more prevalent within the skills needs demanded by all employers. This creates a particular challenge to meet the demand for skilled labour while ensuring that new labour market entrants have the right mix of digital and other workforce skills and practical experience. Additionally, many job opportunities are accessed and recruitment undertaken via digital means.
A new digital entitlement will be introduced nationally from 2020, feedback from our market engagement event supported the introduction of digital pilots in advance of this. Providers will be asked to co-design and produce digital learning that meets the needs of employers and industry whilst upskilling residents. The pilot will address work ready digital skills and barriers to learning and employment rather than displace current AEB and other skills provision (which currently includes provision that enables residents to access Universal Credit and familiarity with technology and general IT confidence). Pilots will instead test how different approaches can encourage participation of adult returners and the upskilling of learners to progress into employment and wider learning.
Target groups for Digital Entitlement pilots will include residents who are:
Economically inactive; Aged over 50 whose digital skills need improving to support work related skills and employment goals (including changing job roles or sector); and Looking to retrain and return to the labour market following an absence.
English for Speakers of Other Languages
The aim is to tailor delivery of English for Speakers of Other Languages (ESOL) provision to more effectively reflect the demographic changes in Liverpool City Region. For example, the current ESOL needs in the City Region of Syrian refugees is different to that required by Somali refugees in the 1990s and different to those of European workers with ESOL skills needs.
Discrete learning opportunities are required for those with skills needs related to: speaking and listening; reading and writing; and ESOL needs appropriate to the workplace. Courses that respect the learning ability of the learners, ranging from graduates in their own country to those with functional skills needs in their own
Page 123 language, also needs to be reflected. The learning experience can also be improved with curriculum enrichment with other learning delivered alongside language skills.
Providers would collaborate to trial new delivery methods that are funded on outcomes rather than delivering current qualifications or funding rates. Pilots would enable optimal class sizes, peer support or other innovations, including:
Improvements in the diagnostic of the precise ESOL needs of the learner and sharing of resources and good practice in this field; Ensuring sufficient frequency and length of provision; Conversational clubs; Development of peer mentor volunteer qualifications with a view to progression to qualifications for new tutors that are at least bilingual; and Short term intensive 1:1 peer or tutor support.
English and maths pilots
Our aim is to ensure more local residents can gain the functional skills in English and maths that help learners gain the most out of work, education and everyday life. The Skills Strategy 2018-2023 includes a commitment to improving attainment in English, Maths and core digital skills. For some learners this may take longer than others, therefore this pilot will support the development of practical progressive steps that apply to everyday life to help keep learners engaged in learning. The content and/ or delivery methodology of these pilots will have the opportunity to be informed by the Maths and English Skills for Growth Action Plan. Target groups will include residents who are:
In employment and in need of improved English and maths skills; Economically inactive in need of improved English and maths skills; and Aged over 50 with low-level skills needs including English and maths.
The Combined Authority will allow a greater proportion of a College, Local Authority or Independent Training Provider’s (including VCS providers) funding allocation to be spent through Community Learning grant in order to participate in this pilot work. It is anticipated that providers may wish to collaborate to trial new methods of delivery that is not restricted to formularised rates of payment, enabling smaller cohort sizes and different teaching methodologies such as:
Family learning literacy and numeracy homework clubs for parents and their children leading to improved English and maths skills for all; Reading clubs for adults with paid and volunteer mentors; Maths clubs for adults with paid and volunteer mentors; Development of peer mentors with a view to providing qualifications to new tutors particularly for maths; Learning in the workplace with TUC and other employer intermediaries; Supporting learners with the greatest needs with additional wrap around support and short term 1:1 provision where necessary.
Page 124
Sector based work academies / Pre-employment Routeways
The Area Based Review 2017 reported that greater volumes of entry level year round provision are required to support pre-employment needs and there is an increasing appetite from employers for this. This proposal would test the payment of outcomes for work experience and jobs in a number of jointly agreed pilots between the Combined Authority and employers with learner referrals from both Jobcentre Plus and other stakeholders including Local Authorities.
Successful completion of a work experience period as part of an agreed pilot would be a paid outcome; as would successful job outcomes resulting from a guaranteed job interview. These outcomes would be paid over and above any AEB funded learning undertaken as part of pre-employability training.
Fully funded learning for individuals in receipt of a low wage
This pilot would ensure more low paid learners in Liverpool City Region have access to free training. A current national pilot allows low waged learners earning less that £15,736.50 to access fully funded AEB skills provision rather than co-funding their learning. The Combined Authority will increase this threshold salary level to the Real Living Wage or the equivalent of £17,062.50 per annum (as of 2018) enabling a greater proportion of learners to access fully funded skills provision, within an agreed threshold.
Impartial independent skills brokerage with employer grants
This option would mainstream the Combined Authority’s Skills for Growth programme piloted through the City Region Deal funding. The impartial skills brokerage service has successfully offered employers co-investment in the bespoke skills they needed that could not be delivered through mainstream provision. Brokers also acted as an advocate on behalf of employers when developing skills solutions to employer needs with providers. The service would continue to be aligned to the City Region’s Growth Hub with cross referral for skills and business support advice for employers with clear complementarity of support.
Enterprise skills
There is a low business density in some areas of the City Region alongside a low appetite for risk from potential entrepreneurs in creating a business without support. Recognising mainstream support exists, such as through the New Enterprise Allowance, and key organisations such as Young Enterprise and The Prince’s Trust who are able to provide support for specific cohorts, the Combined Authority would look to develop a local offer that can build on the strengths of the City Region. The pilot would learn from previous projects such as Local Enterprise Growth Initiative and New Entrepreneurs Challenge to identify current gaps in available support. Enterprise awareness and exploration of practical skills required such as marketing, finance and use of social media would be a key feature with a view to providing a valuable introduction to running a business and the practicalities of self-employment as an option.
Page 125 Capacity building through continuous professional development (CPD)
Providers and stakeholders as part of the Area Based Review reported rising incidences of people with mental health needs locally. The Combined Authority would support the training of trainers to be confident in their role as the first referral point for learner support with a focus on learner mental health and wellbeing. The success of this pilot would ensure that Colleges, Local Authorities and independent training providers (including VCS providers) are able to support learners as a point of mental health first aid and onward referral, and are better enabled to help someone who may be experiencing a mental health issue or illness affecting their resilience and future life chances.
Changes to funding rates and funding new qualifications and learning
Longer term, changes to national funding rates would help the Combined Authority to incentivise learning in priority areas. For example, the Employer Skills Survey 2017 highlighted employers from digital and other sectors that had skills gaps in relation to new recruits. Locally developed new qualifications could be funded to meet these needs. This approach could also be used to encourage engagement of specific learners to help narrow the gaps in achievement from disadvantaged groups.
Changing existing funding rates would require a robust business case that considers the potential impact on the market place, displacement of other provision such as apprenticeships and the impact of current employer funding contributions to meeting sectoral skill needs.
Page 126 Agenda Item 10
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT AND PORTFOLIO HOLDER: INCLUSIVE GROWTH, ECONOMIC DEVELOPMENT, DIGITAL AND INNOVATION
“ONE FRONT DOOR”
1. PURPOSE OF REPORT
This report outlines findings from the review of inward investment capability across the Liverpool city region and proposes a new “One Front Door” delivery model for engaging with prospective investors.
2. RECOMMENDATIONS
It is recommended that the Liverpool City Region Combined Authority:
(a) consider Appendix A to this report and accept in principle its proposal for the creation of a One Front Door Team;
(b) delegate authority to the Director of Commercial Development and Investment to establish a costed business plan as well as protocols, service level agreements and engagement structures that underpin the One Front Door Team; and
(c) consider at a later meeting the detailed plan and funding request (as soon as practicable).
3. BACKGROUND
The background to the proposed „One Front Door‟ model is set out in Appendix A to this report.
4. RESOURCE IMPLICATIONS
Page 127 The proposal foresees the creation of a small team of inward investment and place marketing specialists, likely in the delivery arm of the Local Enterprise Partnership.
The One Front Door Team is not designed to replace local authorities' existing investment and growth teams. It is designed to increase the number of investment inquiries overall and to improve the chances of these inquiries becoming new investors.
Local authorities' investment teams comprise circa 100 across the City Region. This proposal is for circa five team members. This is a light touch proposal that will complement local authorities existing strengths.
4.1 Financial and Human Resources
The Combined Authority is preparing a budget and operational plan for the proposal. The following assumptions apply: - The Team will comprise approximately five members initially. - Funding lines may be drawn from ERDF, LEP and DIT to support running costs; remaining costs and funding options will be presented to Combined Authority members. - Private co-investment will focus initially on commissioning events/activities.
4.2 Physical Assets
The One Front Door Team will be located in Mann Island.
4.3 Information Technology
There are no specific Information Technology implications arising from this report.
5. RISKS AND MITIGATION
There are no specific risks and mitigations implications arising from this report.
6. EQUALITY AND DIVERSITY IMPLICATIONS
There are no specific equality and diversity implications arising from this report.
7. COMMUNICATION ISSUES
The Combined Authority will prepare a communication plan to inform the Liverpool city region business community, national government agencies and stakeholders of the proposed approach.
8. CONCLUSION
Page 128 Having a city region place marketing plan in place will improve our ability to attract inward investment. The Combined Authority proposes a shared platform to engage with new investors and businesses, built on principles that will generate additional value to our local authorities‟ own initiatives. It requires private sector participation, can be deployed quickly and is compatible with the LEP review now underway.
Establishment of One Front Door in no way prevents local authorities from engaging with businesses or with potential investors that reach them directly or indeed showcasing their opportunities at events or when engaging in international events or visits.
It is recommended that the Combined Authority accept the business plan which details the protocols, service level agreements and engagement structures that underpin the One Front Door Team.
MARK BOUSFIELD DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT
Contact Officer(s): Lorna Rogers, Head of Mayoral CA Priorities (Ext. 1361)
Appendices: Appendix A – One Front Door Report
Page 129 This page is intentionally left blank Appendix 1
“One Front Door” Review and Proposal for a Shared Service
1. Background
Genesis At the end of 2017, Liverpool City Region (“LCR”) Combined Authority (“CA”) members agreed to review the function and interplay amongst the CA, Liverpool Vision, the LCR Local Enterprise Partnership (“LEP”) and Merseytravel, with the object of eliminating duplication. As part of this review, and pursuant to feedback from the private sector that LCR’s investment landscape was confusing and fragmented, the CA agreed to undertake a review of its investment services offer. Its objective was both to identify areas of duplication and opportunities for improvement, under the label “One Front Door”. The CA’s investment team has led this review, cooperating with the LEP. The review now provides an opportunity for LCR to improve the investor journey and work in partnership with key stakeholders to develop a collaborative service offer.
Scope “Investment services” form part of activities that places – like cities or city regions – undertake to attract visitors, students, residents, businesses and investors, with the aim of generating economic growth and wellbeing. The below graphic shows a continuum of activities, with marketing to tourists and visitors on one end, and support to incumbent businesses at the other. Each of these services interacts.
Place Inward Business Culture Destination Marketing Investment Growth (tourists, Marketing (new (new (incumbent visitors & (tourists) businesses businesses businesses residents) & investors) & investors) & investors)
The CA’s review included: - Place marketing, i.e. the way a place presents itself to businesses and investors outside its own boundary; place marketing typically comprises attendance at conferences (like MIPIM), pro-active outreach (like engaging with business leaders in London) and presenting the place in a coherent way to stakeholders (like the Department for International Trade)
Page 131 - Inward investment services, i.e. the services a place offers to businesses and investors interested in committing to that place; this is an account management function, helping would-be investors understand the place, its networks and leaders, and the opportunities available The review did not include the activities shaded in grey but could do so in a future phase (please see below).
Economic Context Most of a place’s economic growth comes from incumbent businesses growing; new businesses starting; and associated networks. 90% is a reasonable estimate. Inward investment remains important because it can improve a place’s economic performance; is a critical tool in marketing to potential residents, national government and other stakeholders about the quality of place; and gives business confidence in the capacity of its local government. Places that perform well in this space are usually able to coordinate public and private initiatives, and to integrate destination marketing, inward investment and business support. Successful places include: - Barcelona, which overcame post-industrial decline by positioning itself as a leisure and knowledge intensive industry base; - Greater Manchester, whose trilogy of economic growth services comprise inward investment (MIDAS), economic analysis and policy development (New Economy Manchester) and Marketing Manchester (place and destination marketing).
2. Strategic Need
Economic Rationale The City Region’s main challenges are to improve its economic performance and the life chances of its residents. A performing inward investment function would contribute by marketing the place, its people, businesses, third sector and networks to groups that are likely to invest; then manage these groups as they made their investment; leading to increased economic activity and local employment. LCR is underperforming in business growth and export performance, and needs a coherent approach to improving each.
Spatial Rationale Business is increasingly connected and knowledge driven. Supply chains, networks, access to talent and intellectual property appear more important than ever. Typical investors are concerned with their ability to access these drivers. For this reason,
Page 132 they conduct their investment analysis without reference to local administrative boundaries but are heavily interested in city regional, urban markets. The LCR Combined Authority geography is a coherent economic geography for many businesses and investors who may ask where they can source employees, a reliable supply chain, financial support and links to university learning. The wider the area drawn, the greater the chance of meeting their requirements. They also view economic infrastructure, like transport services, at this level. Large. relocating enterprises would not typically analyse a place at a lower level – but might consider a wider geography, like the North West, Northern England or the UK. Given also the presence of the CA and LEP with the six local authority coverage, this is for investment and administrative reasons the most appropriate level on which to base shared inward investment services.
3. CA Review and LCR’s Current Provision
The CA review comprised three listening sessions with investment practitioners from our local authorities, LEP, universities and other stakeholder bodies; a learning session with influential LCR organisations; individual discussion with expert stakeholders; and review of other places’ delivery bodies. A further learning session with London based tech and property investors, led by Centre for Cities, is planned for September. LCR’s current offer limits its economic growth potential because it does not routinely offer the potential investor a complete or coherent experience. The review found: - A confusing landscape. Businesses are often unsure how to navigate amongst local authority, LEP, CA, third party and academic offers of support. Differences emerge between political and officer messaging. Third party organisations like the universities also have no single front door. - A variable landscape. Local authority arrangements for inward investment range from no provision (like Halton), to significant outsourcing (like Wirral), to provision of arm’s length resource (like Liverpool) to provision of in house resource (like Knowsley). In certain sectors, positions are duplicated amongst the LEP, Liverpool Vision and local authorities. - Incomplete coverage. Local initiatives are variable as described above. LCR wide initiatives are limited by European funding restrictions. The ERDF funded new market initiatives programme can support outreach aimed at SMEs. It cannot support large business attraction, intra UK activities or the transfer of European businesses. So its offer is by nature incomplete. - Partial buy-in. LCR wide initiatives have not generated enough buy in from local authorities to prevent high profile competition for the same target investors from neighbouring local authorities. Officer practitioners appear to have greater faith in cooperative working than senior officers and leaders. - Inconsistent data. The sources used to establish investment cases vary.
Page 133 It is also important to note that LCR has a group of dedicated investment practitioners, mostly officers but also in key assets like Sci-tech Daresbury and the universities. These practitioners have used the ERDF funded programme to establish a coordinated, sectoral approach to place marketing and inward investment. They credit this programme with improving LCR’s investment performance and its relationship with key stakeholders like the Department for International Trade. They also concede, however, that its investment board has not become a platform for senior coordination, protocols are not always followed, customer relationship management is not in place and that monitoring and evaluation is largely absent. There is a good foundation to build on, and strengths across the region that can be harnessed to provide an excellent investor experience through a more comprehensive approach. The sector specialism working groups are an example of collaborative working that benefits all key parties.
4. Proposal for a City Regional Service
The CA believes a service that coordinates existing resources, engages transparently with local authority teams, engages the private and third sectors, account manages the investment process and commissions place marketing activities can be established immediately and will significantly improve LCR’s performance. This is the “One Front Door Model”. Creating a place marketing and inward investment function based on the following principles will result in the following added value: Principle Value add Investor first Focusing on an excellent investor journey will improve service, LCR’s reputation and increase investment conversion rates Efficient use of Levering local authority capacity, CA policy, investment and existing resources data functions and LEP expertise without duplication will minimise cost base Buy-in through Making activity and performance available to partners will transparency encourage trust Private sector Enabling private sector to co-create strategy and delivery participation will maximise both support and co-financing of activities Evidence led For investors, CA data and analytics function can provide a service centralised service with consistent and credible data to power propositions For stakeholders, a central point to collate all inquiries, performance data and feedback enables us to measure impact and outcomes and use this to improve service offer
Page 134 and inform future policy and strategy
Preferred Option The CA’s preferred option is to establish a small, core team (the “Team”) overseen by a mixed, public-private investment board. The One Front Door Team is not designed to replace local authorities' existing investment and growth teams. It is designed to increase the number of investment inquiries overall and to improve the chances of these inquiries becoming new investors. Local authorities' investment teams comprise circa 100 across the City Region. This proposal is for circa 5 team members. This is a light touch proposal that will complement local authorities existing strengths. Local authorities will continue to engage directly with their incumbent businesses and with new investors that they meet. The One Front Door proposal will help, for example, when potential investors have not yet identified a location. It will help prevent our local authorities from competing against one another. It will also provide high-quality, relevant data that supports One Front Door and individual authorities to be more effective at securing investment.
Core Functions The Team would become responsible for: Place Marketing Management - Co-develop with partners, including LAs, the LCR place based marketing strategy; ensure clear, consistent messaging, linking in with other strategies and policies, and commissioning activities to deliver on agreed objectives - Administer a commissioning function that allows third parties to request financial and resource support for place marketing activities (whether marketing, events or evangelising) - Support commissioned events - Report activity and performance, including for monitoring and evaluation Note that the proposal does not include the delivery of these events. The intention rather is to create the environment and capacity to support those events most capable of generating economic growth. Under a place marketing commissioning framework, all LCR stakeholders, from public to private to third sector, would become responsible for place marketing, whether by evangelisation, participation in events or outbound marketing activities. This framework would specifically target private leadership and co-financing, and may be matched by SIF funding.
Page 135 Note also that a credible format for place marketing is in supporting the private sector to convince their investors and management teams that the Liverpool City Region is not what many of our “problem demographic” (senior professional men over 45 in London and the South East) wrongly consider it to be. Inward investment services - Operate as the natural starting point for inward investment inquiries - Assist local authorities in managing inquiries that reach them directly - Provide a platform for collaboration amongst local authorities and other stakeholders - Help manage the investor journey and hand over the relationship to local partners under agreed protocols - Maintain a central database of activity and relationships - Report activity and performance, including for monitoring and evaluation The investment journey will be crystallised in collaboration agreement with partners that ensures leads are handed over local authority investment teams once the potential investor has identified its preferred location. Please see below two diagrams that summarise investment journeys, the first with a local authority directly and the second with the One Front Door team coordinating. (Blue shows LA participation, orange shows One Front Door participation.)
One Front Door Coordination
OFD Team generates proposition inc. research, peer network, SIF advice Positive outcome - LA completes investment OFD Team OFD receives understands needs Suitable locations Investor selects and shares inquiry identified with LAs preferred location inquiry with LAs Negative outcome - LA passes data to OFD for monitoring & insight OFD Team prepares “roadmap” for inquiry
Page 136 Local Authority Lead
Positive outcome – LA completes investment
OFD team can support with data & analysis, LA proceeds with inquiry peer “roadmap” and SIF advice
Negative outcome – LA LA receives LA meets inquiry to passes data to OFD for understand needs inquiry direct monitoring & insight
Inappropriate for LA, OFD team manages info. passed to OFD for inquiry for handover to other boroughs alternative LA
Engagement The Team will establish monthly operations meeting with nominated counterparts in each local authority. These meets would serve to interrogate progress, fair treatment and tactics. Agencies would be engaged through collaboration and cooperation agreements, which would ensure clarity on their roles, responsibilities and service level expectations. Please see Annex 2 for scenarios.
Governance The Team would work to a place and investment board comprising the CA lead portfolio holder for economic growth, the CA director of commercial development and investment, the LEP chair or managing director, a department for international trade representative (to secure buy in), a local authority chief executive on rotation and three private sector representatives on rotation. The role of this board is not to manage inward investment. It is to monitor progress against strategy, assure fairness in how inquiries are handled, resolve conflicts, consider performance and assure buy in of stakeholders in LCR and beyond. It will also consider funding requests for place marketing co-financing according to a strategy agreed by the CA. Please see below a graphic summarising the proposal for a One Front Door Model:
Page 137
Minimal Buy-In A central function of this type can only succeed if stakeholders, particularly local authorities, believe they are treated fairly. The team will generate buy-in through reporting its activities to local authority chief executives frequently; operating on an open book basis, allowing any stakeholder (acting reasonably) access to its documents and records; and by coordinating with the CA policy and investment teams on investment incentives and alignment with CA strategy. Local authorities’ right to interrogate approach and performance is therefore clear in advance. In return, local authorities will need demonstrate their buy-in by observing the protocols established, sharing minimal information investment opportunities not generated by this central team (to avoid suspicion of gaming the system) and committing to senior officer time to engage, including chief executive time. The initiative risks failure, with each local authority having to pay for its own service and competing with each other, without this.
Operating Cost The CA is preparing a budget and operational plan for the proposal. The following assumptions apply: - The Team will comprise approximately five members initially - Funding lines may be drawn from ERDF, LEP and DIT to support running costs; remaining costs and funding options will be presented to CA members
Page 138 - Private co-investment will focus initially on commissioning events/activities, and the public share of this cost will be presented to CA members There is a cost associated with this function since it represents additional activity. If the Leaders and Mayors are willing to accept the recommendations, however, the Investment Team will establish a business plan based on using SIF funds for a period of 3 years. The approximate cost of this service is £1.5 million over three years, for both the account management and the co-funding of privately led investment initiatives. Please note that this does not include destination marketing (aimed at attracting tourists), which is likely to attract a SIF request of approximately £1 million.
Structure and Location Either the LEP or the CA could house the One Front Door Proposal, with the team located in Mann Island. The best strategic fit is emerging as the LEP’s delivery body (with clear mandate, new job descriptions and reporting lines) since this fits closely with the recent LEP review’s recommendations on delivery. The CA will further elaborate the legal structure in the business plan for presentation to members.
Branding One Front Door is the working title of this review but it is not meaningful to external parties. Likewise, LCR is a useful acronym for insiders but is not meaningful elsewhere. The CA is participating the city region brand narrative work launched separately and by the private sector, and will seek to integrate the results of that work into its proposal (see below for further discussion).
Other Options Considered In forming this proposal, the CA considered four options: Option Result / commentary Do nothing Low coordination and investor confusion results in less investment Fund LAs to provide Funding LAs to deliver services fails to address coordination service requirement and risks duplication of resource Outsource Retaining a consultant to provide marketing and investment requirement to services for LCR is highest cost option and is not foreseen consultant in CA or LEP budgets In house capacity Maximises leverage of existing resources, complements with commissioning LAs own activities, scalable and likely to achieve best value
Page 139 for money Therefore preferred option
The do nothing option poses a risk to our regional growth targets set out in the LCRCA Growth Strategy. The preferred option provides an opportunity to make an impact; challenging perceptions, building on the region’s heritage and global brand as a competitive differentiator. There is a need to do things differently but it requires the trust and buy in from all key partners.
5. Future Work
To provide a comprehensive service, the One Front Door work stream could be expanded to include the grey areas in the graphic from Section 1, repeated below:
Place Inward Business Culture Destination Marketing Investment Growth (tourists, Marketing (new (new (incumbent visitors & (tourists) businesses businesses businesses residents) & investors) & investors) & investors)
The rationale for this is twofold: first, the circles are all interrelated and reinforce one another. Second, crucially, business growth is the single area most likely to generate economic growth if performed well. Current provision is fragmented despite recent improvement through the Growth Hub initiative. Please see Annex 2 for an indicative timeline for future work.
6. Link to other Strategies/Policies
This review links in with a number of local strategies and policies that will underpin and support this revised approach. The summary below is not an exhaustive list but provides an overview of the key strategies and policies that are in development that have interdependencies, synergies and need to be aligned with this revised offer; Strategy/Policy Description Liverpool City Region Currently under development this provides the region with Local Industrial an opportunity to develop a local industrial strategy with a Strategy robust evidence base that supports our regional priorities on skills, innovation, energy and infrastructure.
Page 140 Liverpool City Region The purpose of this strategy is to stimulate further Internationalisation international activity with a focus on FDI, R&D, exports, Strategy and Delivery overseas visitors and international students. A number of Plan recommendations reinforce and support the proposed One Front Door model, including having a clear commercial offer for businesses, a one front door inquiry system, and adopting an account management approach. Liverpool City Region This is currently being led by Professor Michael Parkinson to Brand Development define and strengthen the Liverpool City Region brand, it is critical for the region and will support this undertaking, we can leverage the strong global recognition of the brand through effective positioning, consistency of messaging and a coordinated response. Building Our Future – This is a bold long term strategy to transform the region and Liverpool City Region grow the economy. A number of targets have been set Growth Strategy around job creation, business start-ups, increases to GVA and the population of the region. The One Front Door delivery model will support the achievement of these targets, with the focus on people, productivity and place, this can be embedded in the key performance indicators for the One Front Door delivery team. Liverpool City Region The LCRCA has developed a strategy to generate Strategic Investment sustainable and inclusive economic growth which will benefit Fund Strategy all in the region. This builds on the growth strategy and will help shape and provide a decision making framework for investment decisions across the region which will support the One Front Door delivery model.
7. Conclusion and Recommendation
The case for change is evident, supported by economic performance data and the feedback gained through the CA review. The CA proposal is for a joined up, compelling platform to engage with investors and businesses, built on principles that will generate additional value to our local authorities’ own initiatives. It requires private sector participation, can be deployed quickly and, if CA members wish, scaled to include future priorities like destination marketing and business growth. The CA recommends that members accept the proposal in principle, in anticipation of a costed business plan.
Page 141 Annex 1: Investment Scenarios Page 142 Page
Page 143 Page
Annex 2: Indicative Timeline for Review of other Functions
Page 144 Page
Agenda Item 11
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT AND PORTFOLIO HOLDER: INCLUSIVE GROWTH, ECONOMIC DEVELOPMENT, DIGITAL AND INNOVATION
LAUNCH OF STRATEGIC INVESTMENT FUND ROUND II
1. PURPOSE OF REPORT
1.1 This report outlines actions the Combined Authority (“CA”) is taking to launch a new Strategic Investment Fund (“SIF”) funding Round (“Round II”).
1.2 Before launching Round II, the CA has identified the funding still available under the first SIF funding round (“Round I”) and must agree a plan to move uncommitted funds into Round II. Local authorities have a key role in assuring delivery of Round I projects.
1.3 The efficient deployment of Round II funds depends on learning lessons from Round I, updating the investment strategy, understanding the funding available in the context of the SIF’s medium-term potential and shaping a credible project commissioning and call plan. Whilst work in these areas is on-going, the CA considers it critical for delivery to relaunch the SIF as soon as practicable.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority:
(a) Agree to the proposed approach to closing the Round I pipeline, noting that projects “timed out” of Round I can move directly into Round II (b) Approve the allocation of pre-development funding to support Round II investment and delegate authority to the CA Lead Officers to finalise the terms presented (c) Approve those commissioned projects that are acceptable to every CA member, noting every project’s requirement to comply with the assurance framework and value for money expectations, and to receive final CA approval
Page 145 (d) Approve the approach to calling projects under Round II and delegate authority to the CA Lead Officers to finalise the call languge in collaboration with the six local authority chief executives
3. CLOSURE OF SIF ROUND I
3.1 SIF Round I Performance Summary
SIF Round I comprised £463 million. The CA has committed £258 million under SIF Round I. Of the sum committed, the CA had disbursed £118 million by end June 2018. The next reporting period for disbursements is end September 2018. True disbursements are therefore likely to be ~£10 million above this end June number.
£65 million is approved but not yet committed, i.e. has received CA approval but not yet entered into a legal agreement. Of this sum, all but £5 million refers to projects that have a funding agreement in draft or under negotiation, and which the CA expects in good faith to progress to signing. £5 million refers to the funding allocated by commission in 2016 to the Littlewoods Building redevelopment, for which discussions over a deliverable scheme continue and should be further clarified following the recent fire.
£71 million is allocated to 12 pipeline projects but not yet approved. These projects have been in the SIF pipeline since early 2017 and need either to demonstrate that they can deliver or to have their allocated funding put under competition from projects that will deliver.
This leaves £68 million from SIF Round I has not been allocated. This amount is the sum of pipeline erosion in Round I and LGF III funds received in 2017 that were subject to no call.
Funds that are allocated to projects but unlikely to proceed as well as the £68 million in funds not committed under Round I must be allocated to projects capable of achieving SIF objectives and delivering the outputs by which HM Government is likely to consider performance.
At the recommendation of the Portfolio holder for Inclusive Growth, Economic Development, Digital and Innovation, the CA will distribute to each local authority a list of projects in its area and the progress they are making towards delivery.
3.2 Key Role of Local Authorities in Delivery
The Combined Authority funds projects but has never acted as project sponsor / delivery body. By contrast, its constituent local authorities are directly responsible for delivery of £100 million of the £136 million project value not yet approved or committed and have a critical role in a further £10 million.
The CA’s role in delivery is to hold project sponsors to their funding agreement; the local authorities have a critical role in driving performance by delivering their own projects and supporting the delivery of those in their area.
Page 146 3.3 Transfer of Round I projects from Gain Share to Local Growth Funding
SIF Round I comprises funds from Local Growth Funds (“LGF”, rounds I, II and III) and gain share (the £30 million per year for 30 years committed on signing of the devolution agreement). Local Growth Funds have annual commitment and output targets as well as a funding deadline of March 2021. Gain share funding does not have the same annual targets but, rather, is subject to an annual conversation and a five year performance gateway. It is therefore a priority to demonstrate progress in annually reviewed LGF performance.
Given under-commitment in the Round I pipeline, the CA considers it prudent to move Round I projects from gain share to LGF funding, in order to improve LGF’s performance and maximise the period available to deliver benefits with gain share funding. The source of funding does not otherwise impact project delivery, and the CA has sought to maintain those projects it has selected for national gain share evaluation – Paddington Village, Cruise Liner Terminal, International Business Festival, Parkside Link Road and Shakespeare Theatre – to be funded as wholly as possible by gain share.
The table below shows projects that the CA proposes to move:
Project Commitment Move from: Move to: Earlsfield Park £2.8m Gain share LGF II – business capital growth Tower Road £1.5m Gain share LGF II – business capital growth Pall Mall £3.5m Gain share LGF II – business capital growth Parkside Link Road £6.9m of Gain share LGF III – transport £23.8m capital Prescot Rail £4m Gain share LGF III – transport Interchange capital (“Shakespeare Rail”)
3.4 Treatment of Remaining Pipeline Under SIF Round I
The CA and its partners’ aim is to maximise commitments under SIF Round I without allowing laggard schemes to tie up funding that could be deployed more effectively elsewhere. It therefore proposes:
- To continue pursuing the commitment of approved schemes in good faith, including always the inclusion of performance measures (mainly timing and funding deadlines) that allow it to identify and eliminate schemes that have a legal commitment but fail to progress as submitted to delivery. o To identify a separate approach to the Littlewoods Building since it requires intensive engagement and cooperation with Liverpool City Council - To require that schemes not yet approved be submitted for CA approval no later than January 2019 (and therefore are submitted for investment panel appraisal no later than December 2018).
Page 147 - To direct that any scheme approved under SIF Round I make a substantive launch of works before May 2019. - To permit that any scheme failing to reach the above deadlines be transferred automatically into SIF Round II with a concept approval, therefore requiring a final submission and board approval prior to funding. - To agree that the Halsnead, Skills Space Daresbury and Maritime Knowledge Hub schemes represent projects of strategic importance and should have their indicative funding allocation ring fenced for six months in SIF Round II. - To agree that schemes transferred from Round I into Round II will compete for funding with new schemes but that none shall be eliminated from the Round II pipeline until a compelling alternative be identified.
4. PREPARATION FOR ROUND II
4.1 SIF Review
The Combined Authority has addressed all actions proposed by the SIF review. Sarah Kemp, Executive Director at Sefton MBC, led from late 2017 and handed over to Mark Bousfield on arrival in post. The CA has continued to address the actions in preparing for the next round of SIF funding.
The major “carrier” of these actions is the new investment strategy since it establishes a fundamentally more proactive way of working, with positive consequences for ten of the 16 actions identified.
The CA has used the review to inform both the investment strategy, the investment teams operations manual (an internal guide, currently being finalised), the work of the programme management office and the support of the CA’s legal and finance teams. Please see Annex 1 for an further details of progress under each review action.
4.2 Organisational Progress
The CA is nearing completion of its organisational plan for managing the SIF. Since April 2018, it has assembled a team of ten development and investment professionals. The team is designed to mix conventional economic development (gap funding) skills with corporate and project investment (commercial funding) skills. Of the ten, six are permanent employees; two work part time under secondment and consultancy; and two have joined the CA’s “intensive development programme” designed to provide junior team members rigorous training in public investment. This training programme should respond to the scarcity of young economic growth professionals in the City Region, one result of local government austerity.
The investment team is procuring, under a new framework, consultants able to lead and support projects in the City Region. This will give the core team some ability to expand in response to demand, and to lend professional support to projects as helpful.
The CA’s programme management office has retained a head of office and is currently establishing a permanent, expanded capacity that can more actively Page 148 monitor CA and Merseytravel projects. Part of its remit for SIF is an ability to manage debt and equity commitments as well as grant funding.
The contribution of supporting teams is as important to SIF capacity as the core investment team. Merseytravel’s legal and finance teams are working to increase their capacity to support operations, including in the use of new accounting software. The combined engagement of the PMO, legal and financial teams will establish a more robust project monitoring capacity.
4.3 Further Update of Investment Strategy
The CA approved the SIF Investment Strategy in July 2018. It now requests a further update intended to incorporate language requested by LCR’s culture team and enable a short-form approval process for projects under £1 million.
The amendments proposed for culture reflect its contribution to the City Region. By providing a shorter approval route for smaller projects, the CA can 1) handle more projects overall, 2) apply its assurance requirements proportionately, as foreseen by national assurance guidance and 3) provide better service by approving projects more quickly. It also responds to the reality that the team’s time is finite.
Please refer to Appendix 1, provided separately, for a mark-up in tracked changed of the approved Investment Strategy.
4.4 Pre-development Funding
The City Region’s leadership considers project development to be a significant barrier to growth. The absence of high-impact, investment ready projects is a risk to SIF. The risk is that the CA finds it has more funds than projects and struggles therefore to generate the economic growth it was established to enable.
The CA cannot reach its potential without acting to improve the City Region’s project development capacity.
Project development requires the commitment of risk funding and dedicated personnel from an early stage. Austerity has reduced project sponsors’ ability to provide this funding and personnel, particularly in the public sector. The inability to develop projects damages most those sectors with long planning cycles. The CA considers the pipeline of projects able to absorb Transforming Cities Funds and to establish a funding partnership with Homes England (which is focused on volume delivery and therefore on larger housing sites) at highest risk.
In order to commit SIF funds in an orderly way, the CA must intervene to expand and improve the pipeline of projects that it might fund. The CA can provide risk funding and expertise to help analyse markets, identify opportunities and develop projects towards a deliverable state. Pre-development funding can be drawn from the CA’s gain share revenue allocation; a small portion of Transforming Cities funding; and Growing Places Funding.
The CA proposes to allocate up to 2% of non-transport funding and 6% of transport funding to pre-development for a period of two years. This sum is reflected in the
Page 149 project commission table below. Please refer to Annex 2 for guidelines to be applied to pre-development funding.
5. PREPARATIONS FOR SIF ROUND II
5.1 Medium-Term Potential of SIF Funding
SIF’s medium term potential is much greater than its recent focus on Round I monies. The City Region and all its stakeholders should view SIF as a long-term investment platform that can manage a much greater volume of economic development and infrastructure funding.
The table below indicates the flow of funds that the City Region could harness, shown visually in the graphic that follows:
Year, all figures in £m 2018 2019 2020 2021 2022 2023 2024 2025 Sum
Confirmed Transforming Cities Fund I 10 30 40 54 134 SIF round 1 20 60 17 97 Growing Places Fund 17 Chrysalis 8 10 8 8 8 10 10 10 72 Sub-total 38 117 65 62 8 10 10 10 320
Expected (if LCR performs) Transforming Cities Fund II 35 35 35 35 140 SIF round 2 50 25 25 25 25 50 200 New Urban Development Fund 8 8 8 4 4 4 8 44 Shared Prosperity Fund 30 30 30 30 30 30 180 Sub-total 0 8 88 63 94 94 94 123 564
Possible (if LCR excels) CA commercial funding 10 10 10 10 10 10 10 10 80 SIF reinvestment 2.5 5 5 5 5 5 27.5 Local Industrial Strategy funding 10 15 15 20 60 Homes England funding 5 20 30 30 30 30 30 175 Sub-total 10 15 43 60 60 65 45 45 343
Total 48 140 196 185 162 169 149 178 1227
Economic development funding from central government appears to follow a virtual or vicious circle : the better you perform, the more you receive, and, the worse you perform, the less you receive. Greater Manchester typifies the virtuous circle. The table above assumes that LCR cultivates a mutually productive relationship with central government in which performance is rewarded by additional funding.
In the table above, the expected and possible funding would only result from very good and excellent performance in meeting the funders’ requirements. The highest number represents an ambition to target collectively. Page 150
The consequences of this analysis are that: - The medium-term “prize” is much larger than underspend from SIF Round I. - Preparing high quality projects for 2020 is at least as important as claiming round I underspend. - The CA needs to be flexible and creative in the sources applied to fund projects.
These consequences filter into the CA’s strategy for investing funds: we must continually make the case of increased investment in the City Region; and it is important to dedicate sufficient resource to investing the Round II but not at the expense of intensive engagement with partners to prepare long-term, high-impact projects.
5.2 Funds to invest in 2018 and 2019
The simple calculation for funds available to invest in rest-2018 and 2019 is as follows:
Start with Under-commitments from Round I minus Commissioned projects plus Funding from other sources equals Funds available to invest
The below takes each line in order.
5.3 Under-commitments from Round I
The base under-commitment is £67 million. This is the sum that is not either committed or allocated to a pipeline project. This sum shall be increased by any further erosion of the SIF Round I pipeline, which the CA estimates at £20-40 million. Since pipeline erosion will be addressed only after the launch of SIF Round II, its full extent will become clear only in 2019 and can be included in a future SIF round. For present purposes, the CA adopts a mid-range estimate of £30m. The under-commitment is therefore £97 million.
5.4 Potential Commissions
The CA may agree to commission projects for immediate delivery. Commissioned projects must meet the same financial, economic and social requirements as any other project and must submit to the same investment process from concept stage onward. They must also receive CA approval of their full SIF submission before progressing to funding. Recommending these projects for commission does not guarantee their approval but rather enables their immediate assembly and progression through the SIF investment process.
The table below shows potential commissions capable of garnering broad support:
2018 commission projects £ Status Eureka! museum £5,000,000 Proposed Town Centres Commission £6,000,000 Agreed Inward investment incentive programme £10,000,000 Proposed Project pre-development programme £6,140,000 Proposed Page 151 One Front Door operations and events £2,000,000 Proposed Digital connectivity - fibre spine £20,000,000 Proposed Total £49,140,000
(The above table excludes the £10m already commissioned in 2018 under Transforming Cities.) Please see Annex 3 for further detail on each project.
5.5 Funding from Other Sources
Besides Round I underspend, the following sources are confirmed available for investment in rest-2018 and 20191: - Chrysalis. The £35m urban regeneration fund managed by the igloo Regeneration consortium has circa £12m available to invest but also has a full pipeline so is unlikely to contribute additional funding. - New “Urban Development Fund”. The CA is working with MHCLG on a new, up to £24m fund to invest in property development by and for SMEs; innovation facilities; and low carbon projects. The management arrangements of this proposal remain to be clarified. It could reasonably invest £10m in 2019. - Transforming Cities Fund. This funding falls under SIF. The CA has commissioned three projects against the £10m to be committed this year. £30m is to be invested in 2019 and the CA must engage proactively with the transport community to achieve this. - Growing Places Fund. Approximately £7m is available now and a further £10 will become available on repayment of loans outstanding. Before committing it to new projects, it must be novated from Liverpool City Council as accountable body to the CA. Therefore, under normal circumstances, the CA will have £10m from the new urban development fund, £30m from the Transforming Cities Fund and £7m from Growing Places for SIF Round II. This does not consider the upside, “possible” funding identified in the medium-term forecast above.
5.6 Calculating the Funding Available
To complete the calculation with working assumptions:
Start with Under-commitments from Round I £97m minus Commissioned projects £53.1m plus Funding from other sources £47m equals Funds available for a call £85m
5.7 New Call for Projects
It is important that the CA provide consistency to the “market” in relation to its funding. Ideally, it will provide a steady flow of funding (as opposed to a deluge followed by a drought) and a clear future pathway for the type of projects it will support. Consistency of funding and clarity of intentions are particularly important to
1 This list excludes the Single Transport Budget for which an additional year of formulaic allocation is planned. These funds will be available through SIF thereafter. Page 152 transport and economic infrastructure projects whose planning cycle is typically several years.
For this reason, the CA proposes to call for growth projects in October 2018 and again in the middle of 2019. A call for skills projects, for up to £18m, is planned for January 2019 and cannot reasonably move forward to coincide with the October call.
In proposing a new call, the CA will keep the basics in mind: the keys to generating value for money are (1) to identify the most productive projects and (2) to facilitate them with the minimum non-recoverable use of funds2. These keys apply to all sectors and types of activity identified below and no call should be considered without reference to them.
The following call proposal responds to four considerations in order to balance the characteristics of its funding with the opportunities in the City Region. It will: 1. Comply with known funding restrictions. These differ for each source of funds managed through the SIF, for example in commitment deadlines, output requirements and match funding obligations. 2. Address output shortfalls. The CA should target projects that can contribute to areas in which its projected output performance is low. 3. Align with the investment strategy. This document is the SIF’s main link to the market and is available to both project promoters and to central government in demonstration of what the CA wants to achieve. 4. Respond to demand. This is a central premise of the SIF.
Addresses Aligns with output investment require- strategy ments
Observes Responds to funding demand restrictions Appropriate SIF call
The following table outlines the CA’s proposed allocation of funding. If approved in principle, the allocation will be elaborated in a call that follows the guidelines established in its new assurance framework and repeated in Annex 4 below.
6. RESOURCE IMPLICATIONS
6.1 Financial
2 Identifying the most productive projects includes the selection of the most attractive option in an options analysis; non-recoverable includes all of pre-development funding, grant and losses incurred on recyclable commitments. Page 153 The report establishes a methodology to invest funds that have already been allocated to SIF.
6.2 Human Resources
The CA’s Investment Team, with support from its legal, programme management and finance teams (all in the Directorate of Coporate Resources) propose to manage Round II. The team and its support will operate within the established annual budget for the CA.
6.3 Physical Assets
There are no specific Physical Assets implications associated with this report.
6.4 Information Technology
There are no specific Information Technoloy implications associated with this report.
7. RISKS AND MITIGATION
The CA’s approach to risk management is contained in the Investment Strategy and, further, in the SIF assurance framework under review by HM Government. The CA must remain within the provisions of these two documents.
The CA will establish a shared SIF risk register and management between the investment and programme management teams, to be reviewed periodically and with escalated as risks intensify. It will approach project level risk in its regular investment process and performance management operations.
8. EQUALITY AND DIVERSITY IMPLICATIONS
There are no specific Equality and Diversity implications associated with this report.
9. COMMUNICATION ISSUES
The CA is preparing a communications plan to generate interest in funding opportunities under Round II and will relay this plan to local authority partners.
10. CONCLUSION
This report describes the steps necessary to reopen the SIF and provides a headline approach to launching a new funding round. It requests CA approval to complete these steps.
MARK BOUSFIELD Director of Commercial Development and Investment Page 154
COUNCILLOR PHIL DAVIES Portfolio Holder: Inclusive Growth, Economic Development, Digital and Innovation
Contact Officer(s): Mark Bousfield, Director of Commercial Development and Investment
Appendices: Appendix 1 – Investment Strategy showing changed for culture and fast-track approval
Page 155 Sector Business Growth & R, D & I Skills Regeneration & Transport Housing Pre-development Sector Development Culture and Other Infrastructure Funding sources LGF II & III - capital LGF II & III - capital LGF II & III - Gain share - Transforming LGF - Capital Gain share - Gain share - capital and Gain share - revenue capital and Cities - capital (preferred) revenue revenue capital and Gain share - revenue (No LGF Gain share - capital Transforming Cities ERDF revenue revenue ERDF remaining) - capital ERDF LGF - capital Min. allocation (ex. £0m £0m £18m £0m £30m £0m £0m Commissions) Target allocation £25m £20m To follow in £10m £30m £15m £6.1m (ex. Commissions) Jan'19 Known Commissions Inward Investment Eureka! Fibre super Pre-development Incentive Programme Museum (£5m) spine (£20m) Funding allocation (£10m) (£6.1m)
Page 156 Page Town Centres One Front Door (£2m) Commission (£6m) (Note CA exploring options for ERDF funded business investment programme) Eligible Activities Support for sector RD&I partnerships Development of Transforming Site acquisition, As provided in pre- priorities established amongst business cultural assets Cities call remdiation, development under the investment and HEIs provided planning, funding guidelines strategy Access, separately infrastructure RD&I network and acquisition, Development Demand led business cluster remediation, Deployment finance finance, equipment and development planning and of digital fibre (All funding in productivity initiatives (physical and infrastructure of and pursuit of virtual) strategic supporting brownfield site Inward Investment, projects growth analysis produced destination marketing Funding for programmes September 2018) and growth hub research Investment in capacity development commercialisation, town centres knowledge subsequent to Support for small office intensive business Town Centres and light industrial formation, Commission property development expansion and
Page 157 Page intended for SMEs support Objectives Job creation Job creation Land prepared Transforming Increase in housing Increase in High value job creation High value job for future Cities call supply (for LAs to investible projects Expansion of economic creation development provided contribute on type) Increase in project base Productivity separately scope and quality Productivity increase increase Expansion of cultural offer Broadband penetration and fibre uptake
Digital inclusion Primary Appraisal GVA, NPPV, Jobs, leverage GVA, NPPV, Jobs, leverage Measures Secondary Appraisal Local job creation Recognition of Apprenticeships Land pre- TBD Housing starts Projects Measures sectoral excellence Assists into developed Permissions identified/unlocked work Cultural density granted and ranking
Annex 1: Detail on SIF Review
No. Action Commentary 1 Annual Review Complete 2 Determine change control Partially complete – new head of PMO to agree procedure proposals and integrate into investment team operations manual 3 Develop the investment Complete – new investment strategy approved in strategy July 2018 4 Develop the Substantially complete – head of data and intelligence/analytic analytics appointed; team transferred from capability Merseytravel to CA 5 Develop the recycling Complete, noting that the City Region’s funding model commitment to recycling funds is as cultural as it is technical 6 Formation of development Complete – core investment team has capacity development skills; procurement framework launched to facilitate project-by-project expansion/support; Chrysalis operating agreement allows project development support; and pre-development funding request forms part of this submission 7 Augment the investment Underway – advert for new members is live; panel terms of reference drafted, to be integrated into investment team operations manual 8 Appoint a broader panel of Complete – project legal support base expanded state aid advisors using Merseytravel legal framework 9 Appoint a broader/more Underway – procurement of new panel underway relevant appraisal panel with expected completion around relaunch of SIF 10 Determine revenue Annual budget sufficient for this financial year; requirement to deliver all external costs to fall thanks to saving on external recommendations appraisers 11 Options for creation of CA to propose pre-development funding to help revenue headspace generate pipeline of high-quality projects
SIF contribution to CA running costs is a long- term aspiration and should be planned separately 12 Define appropriate PMO Substantially complete – structure agreed, capacity and structure capacity increase proposed 13 Create the programme Substantially complete – performance lines performance report established by investment strategy and assurance framework; new head of PMO to agree format details and integrate into investment team operations manual 14 Create the programme Partially complete – proposal due for approval by board CA directors 15 Review pipeline for On-going requirement. See body of report. quality/output/contract remediation
Page 158 16 Identify additional On-going requirement. See body of report. opportunities outside pipeline
Page 159 Annex 2: Guidelines for the Provision of Pre-development Funding from the Strategic Investment Fund
Item Detail Pe-development Financial support in aid of potential SIF projects, to be Funding drawn from funds available for SIF investment.
Duration Pre-development Funding shall be available for 2 years under this funding. The CA may at any time seek to amend these terms by approval of CA Members.
Amount The CA shall request 6% of funds SIF available for transport projects and 2% of all other funds available to invest.
Purpose To provide funding that could identify, improve or expedite a project with high probability of receiving SIF support under the SIF investment strategy and, usually, within the scope of an existing / forthcoming funding round.
Eligible Projects 1. A project which, sufficiently elaborated, has a high probability of meeting the objectives, priorities and requirements established by the SIF Investment Strategy and therefore receiving support. 2. A study which seeks to establish the market and key parameters for a project which, sufficiently elaborated, has a high probability of meeting the objectives, priorities and requirements established by the SIF Investment Strategy and therefore receiving support.
For the avoidance of doubt, these requirements include the ability to meet the SIF’s value for money criteria and expectations.
Eligible Activities Project preparatory work until the earlier of: o Selection of a preferred option for detailed design (e.g. GRIP stage 3 for Network Rail) o Ability of the sponsor to capitalise costs associated with preparation o Approval of SIF funding commitment
Such work may include: Feasibility Studies; Options Appraisals; Market Studies; Business Plan Development; Outline design work; Master Planning;
Page 160 Pre-application planning activities / scoping studies, transport impact analysis, environmental impact;
Such development work must be required in order for the applicant to submit a later application for SIF funding.
No Pre-development Funding shall support a recipient organisation’s internal costs (though internal costs may be considered as co-financing at the CA’s sole discretion).
Approval Process The CA, through its Internal Panel, will determine the eligibility of projects and studies.
Unless by exception, it will consider project funding requests at the Outline stage of the SIF approval process. It will consider studies at an earlier stage.
Application for development funding to be presented to Internal Panel, detailing: Proposed long-term project; Purpose of Development Funding/Eligible Activities and link to overall project / why required prior to SIF application; Link to SIF objectives and priorities; Amount required; Confirmation that funding requested is additional; and Public Procurement approach (see below)
Information above to be incorporated into a standard short application form.
Reporting to the The Investment Team will report quarterly on: CA Projects supported with Development Funding; Amount allocated; Amount spent; and Outcome of support
Review of Decision A CA Member may request the review of an award or Making refusal to award Development Funding. The metro mayor and portfolio holder for economic growth will hear this review.
Minimum/Maximum Pre-development funding shall be: Funding Available provided in the minimum amount necessary to secure the specified (and agreed) outcome additional, and is not intended to replace other organisations’ project development capacity
Page 161 Main Conditions Development Funding shall only meet external costs (such as professional advisors) related to such eligible activities. Organisations’ internal costs (staff time etc.) are not eligible.
Funding required to be approved by CA prior to commencement of Eligible Activities;
For projects sponsored by the CA (Commissioned Projects): up to 100% of the cost of Eligible Activities;
For projects sponsored by 3rd parties: up to 90% of the cost of Eligible Activities in the transport sector and up to 60% in all other sectors;
A development work agreement in place with the Sponsor (for projects sponsored by 3rd parties) covering:
Agreed scope of work of third parties or such scope to be agreed with CA prior to commencement;
Requirement of CA to approve identity of parties and contracts (so that there are no adverse limitations on Intellectual Property / restrictions of use) undertaking the work (if not already identified);
CA to be co-beneficiary/addressee of work undertaken / relevant 3rd party to have equivalent duty of care to CA. All reports / deliverables to be provided to the CA.
Except where commercial confidentiality requires otherwise, CA be able to use deliverables for wider purpose;
Sponsor accepts CA’s obligations as a public body (such as FoI and public sector procurement requirements);
Where considered appropriate, CA entitlement to attend any meetings with external third parties in respect of progress reporting / interim findings etc.; and
Funding drawn down on provision of copy invoices certified as properly payable by the Sponsor
Page 162
In general it is anticipated such agreement will be set out in a letter to be countersigned
Public Where 3rd parties are being engaged by recipient of Procurement funding this may fall within CA requirements to undertake a procurement exercise. Where relevant, waiver of requirement to undertake a procurement exercise will be sought as part of the Approval Process.
State Aid It is expected that any funding provided will fall below de minimis limits. Where this is not the case, the CA will require a State Aid compliant funding route.
Page 163 Annex 3: Further Information on Proposed Commissions
2018 commission Max. Commentary Status projects commitment Funding of a new, science focused museum at Seacombe Ferry Terminal, Wallasey, following successful bid for ~£3m of external funding. The museum is deliverable and Eureka! museum £5,000,000 Proposed supports new ferry business case and STEM education ambition
Funding for town centres initiative launched in July 2018, designed to support sustainable Town Centres £6,000,000 Agreed and social inclusive positioning of our town centres Commission
New programme to be developed by collaboration between Knowsley MBC and the CA for a City Region incentive scheme for new investors. The scheme will provide a common Inward platform to assist in attracting new businesses under a delegated approval regime that Page 164 Page investment £10,000,000 Proposed improves time-to-decision and reduces risk of competition within the City Region, i.e. will incentive become an additional tool for local authorities. The One Front Door listening sessions programme revealed a strong desire for funding of this type amongst LA practitioners
Project pre- Pre-development funding proposal as described in the body of this submission development £6,140,000 Proposed programme Funding for the three year operation of the One Front Door initiative, covering both small One Front Door core team and commissioned co-financing of place marketing. Please refer to CA operations and £2,000,000 Proposed submission on One Front Door events
Mayoral priority. Investment in the “fibre super spine” under discussion through the Digital Digital Infrastructure Action Plan and associated groups. Investment case to be presented late connectivity - £20,000,000 Proposed 2019 for digital infrastructure from Southport to Sci-tech Daresbury, and into each fibre spine borough
Total £49,140,000 Annex 4: Minimum Criteria for a Call (extracted from Assurance Framework)
Approach to Calling Projects The constituent councils and CA wish to identify and fund those projects that best fit the investment strategy in ways that have the greatest cumulative impact in reaching the objectives rather than projects that are simply available to be funded. The investment strategy states:
We will strive to be flexible, creative and “mode agnostic”, i.e. to fund the most effective delivery of our objectives without favouring any one type of intervention (what works best, goes). Our aim is not a physical legacy but a human one, benefitting all our residents and communities. The approach, therefore, will start by defining funding available, the strategic outcomes the CA wishes to facilitate and then work to set parameters for how those outcomes can be realised. This is linked to the inclusive growth principle which offers a more holistic approach to investment with fewer trade-offs and a better mix between the development of places and the development of people.
Funding Available LCRCA will clearly state the total sum of funding to be invested and the source(s) of that funding. The type of funding available and who may apply for that funding will be defined. Minimum requirements: volume and source of funds.
Outcomes Sought The way the CA identifies the outcomes it seeks to “buy” will depend on the funds available to invest. The Strategic Investment Fund is a platform for diverse government and other funding, and each source may have its own objectives and requirements. When calling projects, the CA will state the outcomes the funds available are targeting. Outcomes may apply whatever the sector or type of project, for instance where the CA wishes to consider projects that improve local productivity and employment, and recognises that both, say, innovation funding and property development are credible ways to realise those outcomes. Alternatively, funds may be restricted to a single theme, like skills, where projects must realise improved learner outcomes. Minimum requirements: strategic objectives and outcomes by source of funds.
Sectoral and Thematic Allocations After defining the outcomes sought, the CA will establish the themes and sectors that – and are not – eligible for the funding round. The CA will draw themes and sectors from the approved investment strategy. When doing so, it may refer to the priorities already contained in the investment strategy or may further specify priorities that the CA wishes to address to support the realisation of outcomes sought by narrowing the range of project and output types. If further
Page 165 priorities are specified in a call, the CA will indicate how these priorities will be treated in the prioritisation process. For each theme and sector, the CA will indicate commitment targets/ranges and whether these indications are firm or soft. For example, it might state that the CA proposes to provide £10-15 million out of a total £30 million in funding to business support services and that in no case will the CA provide more than £15 million in total. Minimum requirements: Eligible sectors and themes, priorities from the investment strategy or further guidance, parameters for funding allocation, parameters for individual projects.
Project Parameters After establishing these allocations, the CA will provide project level guidance, identifying requirements and restrictions that each project must observe in order to be considered. It will specify which elements of this guidance are compulsory and which are advisory. This guidance will be provided at the fund and/or sectoral/thematic level, whichever is most likely to guide project sponsors in understanding the criteria. Project parameters will include size; likely SIF/public funding intensity (for which we will differentiate between repayable and non-repayable funding); timing of launch, delivery and operation; match funding; stakeholder support; private investment and match funding. the CA will address impact and outputs separately; this section will refer to the formation and delivery of the project rather than its impact. Minimum requirements: Necessary and desired project parameters, excluding impact.
Funding Parameters The CA will outline a range and limits for the repayable and non-repayable funding we will consider providing to any project. As with the project parameters, it will specify whether the range is indicative or compulsory. When specifying these parameters, the CA may provide non-binding guidance on the funding approach it is seeking to obtain for different types of project. Minimum requirements: Advisory and compulsory funding parameters.
Outputs Sought and Appraisal Criteria For funds overall, and each eligible sector or theme, the CA will specify the intermediate outputs it is targeting in making the call. For example, transport projects requesting £5 million or more of public funds are required to pursue a WebTAG appraisal methodology. It follows naturally that projects of this type will provide a Benefit Cost Ratio calculated under the WebTAG methodology and that the CA will consider that output in reaching its funding decision. The CA may provide reference rates that indicate the output intensity it expects from projects as well as hurdle rates that projects must achieve in order to be considered for funding. For instance, the CA may state that the national cost per job range in
Page 166 sector A is £10,000 and that it expects all projects to meet a cost per job hurdle of £15,000 or less. The CA may also provide guidance on outputs it expects to be delivered but not expect formally to appraise. These may include local employment intensity, contributions to inclusive growth or environmental improvements. Wherever guidance is issued it will state clearly the role the outputs have in project appraisal. Finally, the CA will confirm the approach it will take in appraising projects. This will be done with reference to the investment strategy and assurance framework since these documents formalise the CA’s approach, and to provide further guidance only by exception. Minimum requirements: target outputs by funding source, sector and theme, detailing reference, hurdle and additional criteria; confirmation of appraisal methodology.
Call Particulars Finally, the CA will define the key dates and requirements for each call. It will confirm the timing of the call and the date by which project sponsors must have submitted their completed and satisfactory expression of interest; the format of the expression of interest to be submitted; and other factors sponsors need to observe in considering their position. As the CA matures, it will look to provide indicative timescales for project approval. Minimum requirements: timing of call, format of registering interest.
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Liverpool City Region
Strategic Investment Fund Strategy July 2018
Note: This work is a confidential and working draft that is not for further distribution
Page 169
Contents
1 3 2 8 3 24 4 34 5 40 6 40 7 43
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1 Introduction
1.1 The Liverpool City Region (“LCR” or the “City Region”) Combined Authority (the “Combined Authority”, “CA” or “We”) has established a Strategic Investment Fund (“SIF”) to manage the public funding we receive following the 2015 devolution agreement. Under this agreement, the Combined Authority has taken responsibility for both policy and investment into key growth areas. The SIF also manages funds provided to the Liverpool City Region Local Enterprise Partnership (the “LEP”)1.
1.2 Our City Region priorities include economic performance, productivity growth, quality of life and inclusiveness, through investing in skills, infrastructure, transport, housing, culture, innovation and enterprise as well as transforming public services and improving health and wellbeing for residents.
Our Objectives
1.3 As a Combined Authority, we aim to generate sustainable economic growth which benefits all in the City Region, delivering added value to the individual efforts of our constituent local authorities by creating the conditions for an increase in the number and quality of jobs and the level of local employment. Our five year plan is to provide 30,000 net additional and high value jobs, of which 60% to be taken by local residents, and £1bn of private sector investment.
About the Investment Strategy
1.4 This document provides our investment strategy (the “Investment Strategy”) for the SIF, including its sources of funding, its principles and priorities, approval process and fund recycling model.
1.5 In 2016, the LEP, acting as a link to the region’s private sector, published ‘Building our Future,’ a growth strategy for the City Region. This sets out our ambition for driving economic growth in the City Region based on three pillars:
Productivity – focusing on businesses where the opportunity for growth is greatest
People – ensuring residents and workers are equipped with the right skills
Place – making the most of the City Region’s physical and cultural assets and infrastructure
1 The LEP allows the funds it receives to be managed by the SIF but remains accountable to government for the performance and compliance of these funds. The Section 151/73 Officer of the LCR CA provides assurance both to the LEP and Government that funds are used appropriately and are compliant.
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1.6 This Investment Strategy builds on the 2016 growth strategy, the metro mayor’s election manifesto and the City Region’s devolution arrangements and is designed to provide a sound basis for taking investment decisions over the next 12-18 months. It foreshadows a longer-term strategy to be built on the City Region’s Local Industrial Strategy, due to be developed during 2018. This Investment Strategy will be updated to reflect the Local Industrial Strategy.
1.7 In due course, the Combined Authority will present an interrelated trio of documents that define its narrative, “industrial” strategy and investment strategy as follows:
1.8 Investments under this Strategy may be further guided by our constituent local authorities’ own investment and growth plans.
The rest of this document is structured as follows:
Section 2 describes the application of the SIF Strategy
Section 3 describes principles and priorities of the SIF Strategy
Section 4 describes the assessment and approval process for SIF funds
Section 5 explains the funding model that will operate, enabling the recycling and re- use of funds
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Appendix 1 provides additional information on the outline assessment stage
Appendix 2 provides additional information on the prioritisation process
On Inclusive Growth
The phrase “inclusive growth” encapsulates the idea that, as an economy grows, the benefits should be shared by as many people as possible. It is a reaction against economic growth policies that may benefit a limited group but fail to help those left behind, for example by driving total economic output (GVA) whilst having less impact on the quality of jobs, opportunities to learn new skills or increase wage levels widely.
Metro Mayor Steve Rotheram believes passionately in inclusive growth and made it an important theme of his election manifesto. Constituent members of our Combined Authority have also produced strategies for inclusive growth. Inclusive growth is not a new concept. Yet until recently academics and policy makers have found it easier to describe what it should mean (by defining priorities or desired outcomes) than to identify concrete measures to make it happen (the mechanics of an “inclusive investment”). One example of how the LCR could support inclusive growth might be around Paddington Village, the proposed extension of the Knowledge Quarter in Liverpool. Paddington Village will become home to the Royal College of Physicians, Proton Partners (an advanced cancer treatment centre) and other life sciences companies. An inclusive approach might actively seek ways for the people of neighbouring Kensington, an area high on the deprivation index, to benefit from the good jobs and high-quality space to be created at Paddington. Investment into the bricks and mortar could be accompanied by (or made conditional on) outreach sessions, education and training plans or public transport facilitation to connect people to the new jobs and training opportunities available. The Combined Authority will include specific measures to drive this kind of approach in its investments and its investment process. On the one hand, it will consider how projects may contribute towards equality of opportunity and fairness in the City Region. On the other hand, it will actively identify improvements and additions that can broaden the scope of a project’s benefits to include more people as part of a broader approach. A project’s potential to generate inclusive growth and social value will become part of our appraisal criteria in committing public money.
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2 Application
2.1 This Investment Strategy applies to the public funding the Combined Authority receives or can access to generate economic growth and transformational change. The funding covered by this strategy includes:
Direct commitments from devolution, comprising £30m each year for 30 years, subject to five yearly re-commitment by HM Treasury (the £900m “gainshare” commitment)
Commitments from national growth programmes including Growing Places Funds, Local Growth Funds and their successors
Commitments intended for LCR transport improvements, including the Transforming Cities Fund, and their successors
Funding we raise for specific projects like, for example, for 5G networks or the Mersey Barrage tidal energy scheme
Funding available to the Combined Authority under its ability to raise funds from the Public Works Loan Board or through its management of owned infrastructure assets like the Mersey Tunnels
Returns from previous investment rounds for which the Combined Authority is responsible
2.2 No funds designated for economic development through this Investment Strategy can be used to support local authorities’ statutory services nor to supplement their revenue budget.
2.3 The Investment Strategy applies to projects in the local transport, land and property, infrastructure, low carbon, culture, business support and innovation, and skills and employment sectors. Whilst its principles and process (sections two and three) shall apply to the housing sector, the Combined Authority plans to release a housing investment strategy, in the form of an addendum to this document, later in 2018.
2.4 Regarding housing, the Combined Authority is proceeding with a city region spatial plan and updated strategy. Housing must be considered as an integral part of the City Region’s offer and growth strategy, to be address by harmonising housing with infrastructure, employment and other themes, and by seeking to partner with private developers, funders and house builders; our constituent local authorities; and Homes England.
2.5 We also note that potential investment in strategic transport infrastructure is assessed under a sector specific appraisal methodology, WebTAG. The Investment Strategy and prioritisation process still applies to these projects, to ensure that they contribute to LCR’s wider strategic economic objectives. Transport projects will still also need to be
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appraised using existing transport methodologies as part of their overall development and approval.
2.6 The Investment Strategy shall also be relevant to funding sources that relate to but do not form part of the SIF, specifically Chrysalis, Merseyside Special Investment Funds and European Structural Investment Funds for 2014-20202. Each of these has a separate investment strategy and approval process; the purpose of this strategy is to coordinate to the extent possible SIF and non-SIF sources to maximise their beneficial impact in the City Region.
2.7 Funds received by the Combined Authority for onward investment into projects are rarely unrestricted. Each source carries its own requirements and restrictions, typically covering their availability, match funding and economic objectives. Furthermore, funding is usually split between “capital” and “revenue”, indicating its requirement to either build physical capacity or support projects’ operations.
2.8 Rather than produce an exhaustive list - it is unreasonable to expect the City Region’s organisations to follow each public funding source - the Combined Authority will undertake to provide quarterly, public updates on its web site of the funding available and the conditions pertaining. Our commercial development and investment team (our “Investment Team”) will also maintain continuous contact with the City Region’s businesses (including through the LEP), third sector and public sector on the availability of SIF funding.
2.9 The Investment Team’s objective is to identify opportunities and projects with the highest potential contribution to the Combined Authority’s targeted objectives and outcomes – with no borough left behind. The Investment Team will maximise the potential for overall delivery in the City Region, whether projects are publicly or privately funded or both.
2.10 To maximise impact, the Combined Authority will seek both to maximise the funding available to the City Region and to maximise the impact of the funding it commits itself. We will seek to complement SIF funding with new, public and private sources of capital, and will collaborate with commercial investors and lenders to fund priority projects and outcomes.
2 The management arrangement for future urban development funds like Chrysalis has not been concluded as of June 2018.
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3 Principles and Priorities
3.1 The core objective of our investment strategy is to ensure that our investment is most effectively targeted at interventions and opportunities that deliver the wider strategic aims of the Combined Authority, as defined in 1.4 and 1.5 above, and to do so in a way that drives inclusive growth and social value, tackles market failure, maximises value for money and provides different kinds of return to the SIF. This section provides detail on the principles and priorities that will guide our investment approach.
Principles
3.2 We will apply the following principles to the operation of the SIF:
Projects must meet at least one of the strategic objectives of LCR as defined in the current Growth Strategy, and the Mayoral and CA priorities for an ambitious; fair, green, connected and just City Region3.
Projects should also either:
Demonstrate a clear strategic case for public investment, for example to address market failure, create public goods and value or provide the enabling infrastructure for growth, and/or;
Represent an opportunity for the CA to achieve a financial return on any SIF investment.
3.3 Projects that meet both principles are especially relevant. Furthermore:
Where projects aim to boost the ‘supply-side’ of the City Region’s economy (e.g. provision of infrastructure, commercial premises, training courses, etc.) there must be suitable evidence of market demand.
We will carefully consider the risk-reward profile of each project, both for our financial commitment and in terms of the strategic outcomes and objectives that the project is seeking to deliver. The SIF aims over the long-term to become a revolving fund that uses receipts from current or previous investments to fund future investments.
We will consistently seek to maximise value for money to the public purse.
Projects should be able to demonstrate significant leverage of funding.
The SIF will ensure a geographic and thematic spread of investment and will engage with geographically diverse places/sponsors across the City Region to help identify
3 See for example: http://liverpoolcityregion-ca.gov.uk/who-we-are-367.
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projects with the highest economic, social and environmental impact potential, as well as sound operational footing. This does not mean an equal share across themes or geographies. Places will benefit in different ways and at different times.
The SIF will be deployed using decision making tools which assess the potential impact of an intervention or investment in supporting inclusive growth and will embed inclusive growth and social value in decision making.
The strategy will be as clear and straightforward as possible. It will not impose an undue burden on applicants whilst still providing for robust decision-making.
All parties to a project will be expected to work collaboratively with the Investment Team and agree credible and robust deliverables and financial structures, together with a clear legal route to delivery, at the outset of the development process.
Projects must be able to evidence competent and appropriate development and delivery capability.
3.4 We will strive to be flexible, creative and “mode agnostic”, i.e. to fund the most effective delivery of our objectives without favouring any one type of intervention (what works best, goes). Our aim is not a physical legacy but a human one, benefitting all our residents and communities.
Investment priorities
3.5 As set out above, our core objective is to invest in the projects with the highest potential contribution to the Combined Authority’s objectives and to maximise the potential for overall delivery of projects in the City Region (with or without public support). This section sets out in more detail the objectives and priorities that will drive our decision taking around sectors and places. The City Region has identified investment priorities in seven economic sectors in which it has competitive advantages and which will drive our future success. We have also identified priorities for our people and places, consistent with our 2016 Growth Strategy, with further detail on People set out in the Skills Strategy of 2018
3.6 These investment priorities are multi-dimensional and may be applied in combination. We will use our investments to develop a cohesive, vibrant and successful City Region that works for residents, businesses and visitors alike.
3.7 The priorities for investment within specific sectors are those which will foster a productive and sustainable, competitive business base, being precise about the relevant drivers of growth and productivity within the city region, such as innovation, infrastructure, skills, inward investment.
3.8 The cross-cutting priority of skills and employment is important for all our sectors and businesses and also in driving inclusive growth and fairness, by providing our residents
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with opportunities to develop skills that will help them participate and succeed and providing support to secure, retain and progress in employment.
3.9 Investment priorities for places are those which are non-sector specific, but which provide the right environment for businesses and people to succeed, often through improvements in physical environment and digital connectivity.
Sectors
3.10 The following sections show where SIF investment could most effectively drive growth and productivity in our key sectors. These priorities are designed to give those developing and assessing projects a clear sense of the priorities against which we expect projects to contribute. Sectoral projects which do not align with these priorities are likely to be rejected on the basis reduced strategic fit.
Cross-sectoral Programmes
3.11 Across all priority sectors, we will support projects that facilitate inward investment of new, productive enterprise and the expansion of existing enterprise through physical and intellectual capital, typically the acquisition of modern plant and equipment and the development/refurbishment of suitable premises. In respect of both, we will progress “programme facilities” that set common requirements and expectations of recipients (in consultation with the Combined Authority’s policy team), enable streamlined decision making and allow for coherent monitoring and evaluation.
3.12 Furthermore, we will consider sector led schools engagement and skills development programmes based on the sectoral analyses provided here: http://www.lcrskillsforgrowth.org.uk/growth-sectors.
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Digital, Createch and Artificial Intelligence
Digital Infrastructure (linked to the LCR Digital Infrastructure Action Plan) Delivery of the LCR-wide full fibre network and Digital exchanges 5G testbed development & rollout Smart Cities development
Delivery of the AI and the data driven economy initiatives inc. the High Performance Computing & Cognitive Computing theme of the “LCR+” Science & Innovation Audit Major projects & cluster development Commercialisation & business scale-up Public sector transformation
Createch sector development and access to new markets Sector-wide place marketing initiatives Smart specialisation sub-sector focused, notably immersive technologies, film/tv & cyber- security New business space geared to digital/createch business needs Innovative sector promotion & marketing
Industry & future demand-led skills initiatives (both new plus scale-up of successful existing) Sector-specific initiatives Cross-sector (linked to priorities identified in other sections)
Digital inclusion initiatives aimed to make LCR digitally inclusive
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Advanced Manufacturing
Build technical and leadership skills in workforce Sector led schools engagement programme Focus on emerging technologies and future skills requirements for existing manufacturers Focus on leadership and management development
Develop innovation support and adoption programme Focus on additive manufacturing, digital technologies, glass, robotics, packaging, materials (Ref SIA priority) Prioritise both commercialisation of research and innovation across firms and sub-sectors
Promote focused sectoral and sub-sectoral marketing Applies to trade and investment
Support research in areas of competitive advantage Prioritise sensors, digital technology, materials chemistry, glass and additive manufacturing
Facilitate expansion of current and future areas of competitive advantage Prioritise automotive, rail, pharmaceutical, FMCG and advanced logistics
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Health and Life Sciences
Build on regional excellence and regional need – sustaining and growing existing organisations and wider sector Invest in the expansion of existing areas of competitive advantage Prioritise infectious diseases, bio-manufacturing (linked to “LCR+” Science & Innovation Audit) Support areas of particular regional healthcare need, including cardiovascular health, cancer and wellbeing Support company/sector scale-up, centres of excellence (physical and professional) and development zones
Support interventions that capitalise on emerging trends and technologies throughout supply chain Including data analytics, artificial intelligence, digital technologies, precision medicine and medtech (including sensor technology) Support the development and uptake of innovative approaches (in NHS/social care) to transform healthcare/address the needs of an ageing society and wider issues (e.g. paediatrics, public health) Support strength and scale of local supply chain, and work across larger geographies (e.g. all of North)
Create platform for sector and cross-sector growth Prioritise knowledge intensity and capacity to generate globally competitive sector overall Facilitate public-private collaboration, including in research, commercialisation and joint working Support industry led skills and professional development initiatives Facilitate expansion of demand led digital, physical and professional infrastructure
Support the attraction, development and retention of high skilled talent and organisations Prioritise sector led initiatives
Drive Inclusive Growth Public health and health/social care-focused initiatives (linked to Devolution and skills, innovation, digital initiatives)
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Professional and Business Services
Develop infrastructure to facilitate future growth Prioritise existing and future demand led physical expansion (land and premises), building world class places Use (digital) infrastructure, including ultra fast broadband, to promote growth and productivity Support transport infrastructure to enable routes to servicing new and existing markets
Support incremental and radical innovation and investment Prioritise SME formation and growth in competitive sub-sectors Priorities access to investment for scale up in competitive sub sectors Facilitate virtual, physical and professional networks – the spaces and places firms want to be Facilitate innovation in and growth of existing firms Support commercialisation of research in competitive sub-sectors
Support targeted inward investment and business growth capability
Support skills and professional development overall Prioritise high value skills development and deployment and productivity growth Develop the flexible and resilient workforce needed, through city region wide action Coordinate skills development with business growth and marketing
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Low Carbon
Support improvement of network infrastructure to facilitate future development Prioritise opportunities arising from new data and technology opportunities Include utilities masterplanning
Facilitate sector growth by: Supporting demand led provision of capital equipment Promoting the development of cross-sectoral, cross-technological capability Supporting viable low carbon energy projects
Develop areas of asset led competitive advantage in low carbon generation Such as tidal generation, hydrogen fuel, offshore wind Support research, commercialisation and early adoption in areas of competitive advantage
Integrate low carbon investment and resource efficiency into all sector investment priorities
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Maritime and Logistics
Support investment that prioritises: Transport and capacity expansion, usually by infrastructure development, including Mersey Gateway, Northern Powerhouse rail and Multi-modal opportunities Emerging changes in logistics industry driven by industrial supply chain organisation, growth in ecommerce, impact of data and analytics in the industry Focus on future demand requirements including port-centric, multi-modal, large sites, proximity to market and workforce, and sustainability performance Coordinated supply chain interventions
Support expansion of areas of competitive advantage in the maritime sector Prioritise sector led marketing and development initiatives Facilitate development and transfer of new technologies and models into the sector
Support development of sector specific skills Including sector entry, expertise in emerging trends and collaboration in emerging technology
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Visitor Economy, Culture and Heritage
Promote Liverpool City Region, targeting: Expansion of visitor numbers and reducing demand seasonality issues . Including expansion of leisure and business markets, routes and visitor type Increases in length of stay and total spend of visitors
Refine commissioning and delivery of place marketing Including platform for delivery of marketing
Support improvements to transport connectivity and infrastructure development associated with growing identified visitor markets Including key physical infrastructure and, selectively, technology platforms
Support improvement in skills, professional development and standards Prioritise sector entry, customer service and manager development Training to support the development of skills across culture and creative industries, supporting their sustainability and adaptability to growth opportunities (including digital, future world of work
Support enhancements in productivity and sector innovation Including scale up, opportunities for building local supply chain and generating efficiencies through use of renewable energy and application of digital capabilities and technologies Including sector entry, expertise in emerging trends and collaboration in emerging technology
Support cultural capacity in the City Region: Cultural capital projects as part of key regeneration developments Cultural capital projects that secure the sustainability of key cultural sector venues, where this sustainability protects existing, or ensures additional, economic outputs and outcomes Cultural projects that enable the development of culture and creative content (including major events) that have a significant impact on the image, competitive advantage and economic growth of the Liverpool City Region Event subvention and attraction for major sporting and cultural events and to attract promoters on a commercial return basis
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People
3.13 The mayoral Combined Authority is committed to action on the long-standing challenges that the City Region faces in terms of social exclusion inactivity, inequality and ill health. This Investment Strategy therefore supports projects which drive inclusive growth and social value, and aim to ensure that communities and residents benefit from growth and have the opportunities they need to succeed and contribute on a more equal and fair basis.
3.14 The kinds of investments we will make to deliver inclusive growth and reduced inequality include:
Projects which support the creation of good quality jobs (including paying the real living wage, permanent contracts and workplace progression).
Projects which support the creation of facilities to support skills development linked to the specific sectoral needs and opportunities of businesses.
Projects which provide training opportunities, whether in-work or through a dedicated programme, supporting people to transition into better quality work at better wages, also improve productivity at the macroeconomic level. As noted above, our sectors have specific skills requirements, but we will also support cross cutting opportunities for raising skill levels (e.g. digital) and improving employability.
Projects which support the attraction or provision of higher-level skills and skills that support innovation.
Projects which improve the quality of labour market information through clearly communicating what businesses need now and in the future, and the skills training that is provided by educators, and demanded by residents. This should include careers materials and activities and be line with the City Region’s Careers Hub.
Projects which prioritise and deliver the use of local labour / local supply chains.
Projects which address specific challenges of people who face complex and multiple barriers to work or are furthest away from employment.
Projects which seek sustainably to address chronic ill health (particularly mental health) as a barrier to employment and wellbeing
Through the project approval process, we will engage with all sponsors on their project’s ability to increase its inclusive growth, social value and equality and diversity, performance. The measures agreed will feature in the project funding documentation.
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Places
3.15 The unique places within our City Region are vital to our long-term success. Our growth strategy aims to deliver places which are well connected to jobs and the services and skills provisions that people need, with high quality residential and commercial buildings, accessible open spaces; supported by well-functioning commercial and residential property markets that meet the needs of businesses and people.
3.16 The businesses supported through the sector priorities above all drive growth and employment in our places, and in addition we will support the following kinds of projects which are specifically about how our communities are built and enhance the environment within which we live and work:
Projects which enhance the sustainable vitality of local town and district centres through investment that delivers new employment opportunities and makes those employment opportunities accessible to local residents. This could be, for example, through the retail offer, leisure, entertainment and cultural facilities, access to services, and strengthening the visitor economy or wider business environment. We will prioritise those opportunities which make the strongest contribution to our inclusive growth and social value objectives, through maximising lasting opportunities for local people and engaging sections of our community that are currently less likely to benefit.
Place renewal projects, particularly those designed to move away from traditional retail, are long-term in nature. The best propositions of this type refer not only to place but also to people and proposition (this latter being the purpose and competitive advantages that apply). We will favour projects that address place, people and proposition holistically.
Projects that maximise the contribution of our major, place based assets, including assets that connect our city region to the global marketplace. This may include, for example, projects in support of the Port of Liverpool, Liverpool John Lennon Airport and Sci-tech Daresbury. This may also include Liverpool’s city centre when efforts are made to link its economic and employment potential to other areas in the City Region.
Ensure the supply of developable land and premises in response to existing or future demand. This means enabling site remediation where it is needed, addressing a range of lot sizes in areas where occupiers want to locate and that are financially viable, with the right supporting physical and social infrastructure. This includes premises for start-ups and entrepreneurial activity and business incubation space4 (including for those communities that are currently less likely to set up and grow businesses), city centre office accommodation, light industrial space throughout the City Region but
4 Premises dedicated to incubation and acceleration must demonstrate a comprehensive and credible operational plan, recognising that networks and support are more critical to growth than the space itself.
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focused on areas of highest demand, as well as large strategic sites for manufacturing and distribution, where latent market demand can be evidenced.
Where there is a demonstrable market failure and other funding sources are insufficient to deliver the quality, tenure mix or delivery rate required, we will invest in projects which ensure that the City Region has the housing stock needed to attract skilled people and provide the quality of life we want for existing communities. Intervention in the housing market to address existing stock will focus on upgrading the housing offer in the most deprived areas, for example through retrofitting properties to address fuel poverty, and increasing the availability of good quality, affordable (in the broadest sense) housing.
Improve access, and equality of access, to high speed and reliable digital connectivity for businesses and residents. It is pressing that the city region provide broadband availability, capacity and speed that companies require to compete in the global economy, to enable innovation and drive productivity.
Protect businesses, the environment and improve air quality by ensuring that the city region has local, competitive and resilient energy supplies that allow us to be more self-sufficient in energy needs. This should include investment in green, low carbon, renewable energy and ensuring this ambition is integrated as far as possible with new developments and transport infrastructure.
The LCR Culture and Creativity Strategy has three key aims: 1) expand and promote our existing culture and creative offer as a core part of a growing visitor economy, including retention and growth in numbers of students (international and UK) and residents - alongside more targeted creative social intervention that engages local people and strengthens communities; 2) develop a supply chain for talent and harness what the region has always done – acted as a pool of talent with pathways into the creative sectors. As part of this to build the resilience of the culture and creativity sector, and 3) sustain and enhance economic growth through culture and creativity; recognising and investing in culture and creativity as major drivers in the visitor economy and creative industries, and as catalysts to achieve outcomes in wellbeing, health, education, cohesion, the future world of work and inclusivity in engagement across all ages and backgrounds.
Investment in the culture and creative sector will assist in the sustainability of the existing culture and creative sectors who deliver significant outcomes for the LCR. Similarly, there is a need to invest in new cultural opportunities that will attract significant investment into, and profile for, the LCR supporting wider place based regeneration, social and economic growth. These will be in areas which have been identified and prioritised for their opportunities for exponential growth. There is an important role for major events and programmes, that enable LCR to continue to use culture and major transformational sporting events to attract visitors, engage
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residents and provide the attractiveness and differentiator for students and new residents. Underpinning this is a need for education, skills and talent pathways into the cultural and creative industries.
3.17 We recognise that achieving what our places need is likely to require patient capital investment and committing to the delivery of projects which are long term in nature. This Investment Strategy enables us to support projects, or groupings of projects, of this type. It allows the Combined Authority to address spatial priorities in a way which delivers the longer term changes needed to provide new opportunities for our communities.
Transport and Connectivity
3.18 Our transport and connectivity priorities draw from the three emerging priorities established for investing the Transforming Cities Fund. These are outlined below.
Theme 1: Enhancing and expanding the public transport network to meet new areas of demand 3.19 This will focus upon the need to transform intra-city regional rail connectivity and exploit the city region’s rail network to maximise the attractiveness and uptake of the new, bespoke rolling stock on the Merseyrail network from 2019/20 onwards. The aim will be on improving the quality, capacity and resilience of the network, likely to include significant enhancements to Liverpool Central Station and measures to improve Liverpool South Parkway’s connectivity and network resilience role.
3.20 New rail stations and significant rail station enhancements may be supported where these directly support the city region’s growth strategy (e.g. enhanced access to the Baltic Triangle or Knowledge Quarter) and where they maximise modal shift on congested routes or on routes that are significantly affected by poor air quality.
3.21 Enhanced rail services on significant commuter routes linking key destinations and with significant potential to attract modal shift will be supported (e.g. the introduction of additional, dual fuelled rolling stock on the Borderlands Line to provide regular, through services into Liverpool and Deeside Industrial Park).
Theme 2: Improving the appeal of public transport, and particularly bus, against private transport 3.22 This theme will principally entail a programme of enhancements to the city region’s core bus highway infrastructure on core commuting routes to the main growth areas that exist or which are developing. Measures will target greater reliability and punctuality, more competitive journey times, operational efficiencies, lower levels of congestion and improved air quality in support of the challenges outlined above.
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3.23 This could be supported through advanced traffic management tools (e.g. the use of red routes, intelligent traffic systems, selective prioritisation at junctions and real time diversions to allow for operational problems) to maximise the attractiveness of bus travel and to complement the Bus Alliance’s investment.
3.24 It will also be supported by measures that maximise both the usage and efficiency of the enhanced core networks. This may include a virtual one stop shop for ticketing, information and travel technology to enable intelligent travel choices to be made, and to remove barriers to interchange and payment and to revolutionise the way that people access, and pay for access to the transport network. This will maximise the city region’s digital connectivity assets. It will also include a radical uplift in the availability of wi-fi coverage and device charging points at rail stations, interchanges and on board buses and trains
3.25 The delivery of works may be supported by new powers that the Mayor benefits from in respect of Bus Services Act and influence over a Key Route Network of local roads.
3.26 The introduction of gainshare arrangements, wherever possible, to capture the benefits arising from improved bus journeys and bus fleet efficiencies, principally, and to reinvest these in promotional activities such as travel planning, marketing and publicity. This approach could also include support from Transforming Cities for capital investments at strategically significant rail stations to generate commercial or revenue returns that will be reinvested in enhanced service levels or level of information.
Theme 3: Intervening for health and wellbeing 3.27 This theme will be focused on the challenge of decarbonising the transport network, reducing emissions and encouraging more healthy forms of travel.
3.28 Firstly, it will entail the development of a comprehensive programme of very high quality, segregated or on-road cycleways linking key residential areas and employment areas. This will have the aim of providing a cohesive and attractive core network of cycle routes serving the city region’s growth areas, including improved access to schools and colleges. This package may be complemented by the roll-out of city region-wide programme of cycle hire and cycle parking facilities.
3.29 High quality interchanges between rail and bus networks and the key route network for cyclists will be supported, where these provide a “last mile” sustainable transport link to work or home, in support of the city region’s Local Journeys Strategy. Technology and information, as outlined in the preceding theme, will be exploited to facilitate the attractiveness and uptake of such facilities.
3.30 Secondly, the roll out of clean fuels (typically renewable electrical, hybrid technology and hydrogen power) on diesel rail services, buses and potentially, the Mersey Ferries, to reduce both carbon and harmful NO2 emissions, both of which contribute to the city
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region’s air quality concerns. Transforming Cities funding could also support new fuelling infrastructure to make the use of such technologies viable and attractive.
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4 SIF approval process
4.1 The Combined Authority’s investment process is described below. Our objective is to create a transparent and efficient journey to funding. We also intend to create robust challenge at the concept stage, with proactive Combined Authority support to reach that stage and move into detailed diligence.
4.2 Each approval stage, and the steps necessary to reach that stage, are illustrated below and described in detail in the sections that follow. Note that the Investment Team will manage projects’ progress through these steps and will be solely responsible for drafting investment reports, based on information provided by the project sponsor and contributions by internal and external consultants. This process requires applicants to make readily available all supporting materials to the application and to enable third party diligence where necessary.
4.3 We will separately provide – through an update to the SIF assurance framework and in our regular market updates – further specification of the information sponsors will provide in progressing through the approval process.
4.4 The CA will require that all applicants seek explicit approval to publicity associated with projects under consideration, and in particular to the CA’s proposed funding of the project.
4.5 Project sponsors will carry the CA’s reasonable costs in structuring, executing and monitoring each project. The costs typically include legal, professional and consultancy fees, and are incurred independently of whether the CA commits to fund the project. The CA will seek, where practicable, to agree these fees in advance with project sponsors.
4.6 The CA will also seek to be clear in advance about the resources it has available and the time likely to be required to progress a project through its approval process.
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Identifying Projects
4.7 The Investment Team will maintain an ongoing dialogue with the City Region’s businesses, third sector and public organisations to inform them of the availability of funding, the current objectives, and to identify and co-design project opportunities from an early stage. The LEP will play an important role in identifying sector led opportunities.
4.8 Our commitment to fund the most effective delivery of our objectives means that we will consider options from an early stage. For example, we may ask, “What is the best way to revive economic activity in town centre X?” and consider interventions across transport, property, business support and training schemes, ultimately progressing the combination of projects that best meets our objective. Alternatively, we may ask, “Which of the five proposed logistics developments in our area best meet our objective?” and progress terms with the top two schemes.
4.9 The Combined Authority will generate project opportunities in two ways:
First, it may call for projects by engaging with organisations and working with them to generate a project in the Liverpool City Region. The Combined Authority may call for projects in batches but will operate by preference under an “open call” system that allows projects to progress when ready.
Second, it may commission strategically important projects by specifying desired outcomes and either delivering a project itself or inviting organisations to deliver the outcomes through a commission or procurement. An example could be where we wish to ensure that training opportunities are provided to a certain group of excluded people; we could identify a project directly or invite organisations to present how they would provide that training then select the provider with the best public value proposition.
4.10 When the Combined Authority makes a call for projects, we will filter opportunities by completing an outline paper for internal consideration5. The project sponsor will provide the information necessary to complete this paper. The aim of this gateway is to agree a project’s potential for delivery and impact before committing resource to working it up.
4.11 Each outline paper will be discussed by a senior Combined Authority team, with results shared periodically with the Investment Panel and CA Board (see below for details of their constitution and role). Projects may be approved for further work or rejected at this stage.
5 Best practice in public investment requires the Combined Authority to consider options when deploying its funds. When supporting a private sector sponsor, the options may be limited because the sponsor controls the project’s scope, scale and timing. The Combined Authority will therefore have the choice of committing to the project or committing the funds elsewhere. The outline stage will assist us in comparable projects by different sponsors.
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4.12 Projects which are rejected will receive a concise statement by the CA on why it has been rejected and what changes would be required in order to pass. The Investment Team may consider co-funding the project’s further development if its credentials appear promising in this preliminary stage.
4.13 Any projects that are subsequently resubmitted by the project sponsor, must make clear through the submission how previous comments have been addressed. Projects will be re-considered if it can be demonstrated that key variables/parameters have changed, at the discretion of the Combined Authority.
4.14 Please refer to Appendix 1 for further guidance on the outline review.
Concept Review
4.15 Deliverable projects with a high potential contribution will progress to the concept stage. The Investment Team will engage with project sponsors to agree indicative terms for SIF support. These terms will include the quantum, return requirements (if any), milestones and principal conditions. They will be captured in a “heads of terms” document to be exchanged between the Combined Authority and the project sponsor/funder.
4.16 The Investment Team will also identify diligence requirements to understand in more detail the project and its value proposition and to complete the prioritisation framework. The project sponsor will engage with us, providing as full a picture of the project and its delivery options as is obtainable at this stage. Please refer to Appendix 2a for typical preparatory information required for concept submission and to Appendix 2b for guidance on the prioritisation framework.
4.17 At this stage, the Investment Team will request that the project sponsor complete an inclusive growth, social value and diversity questionnaire. The responses, which will cover gender and minority balance, inclusive growth and local procurement potential, will form the basis of a dialogue to maximise the project’s inclusivity and local growth impact, to be included in the legal documentation on approval.
4.18 The Investment Team will submit projects to the investment panel, a body composed of senior CA officers and external experts (the “Investment Panel”), on the basis of a concept paper that includes the heads of terms discussed and a completed prioritisation framework. Several funding and delivery options may still be considered at this stage.
4.19 Projects that score highly enough relative to their sectoral peers and to the rating of projects across the SIF portfolio will progress to detailed diligence.
4.20 Projects that do not score highly enough will not progress but will receive formal feedback on their score. This feedback will include steps available to improve the score and the support the Combined Authority is willing to provide in taking those steps, if any.
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The Combined Authority does not expect any project to be submitted at the concept stage more than twice and reserves the right permanently to exclude a project.
Detailed Diligence
4.21 On successful progression through the concept stage, the Investment Team will conduct comprehensive market, operational, financial and structural due diligence on the project. This will cover all aspects of project development, operation and exit in a manner similar to that which commercial lenders and investors might adopt. The team will identify each project’s diligence needs and is likely to retain external specialists to support this work. For example, a property project would typically require third party market, valuation and cost analysis.
4.22 The Investment Team will also negotiate detailed terms for the SIF’s financial commitment and may engage internal or external legal counsel to aid this process, agreeing a viable legal structure, detailed legal terms and state aid approach for the public investment. This agreement will be captured in a “term sheet” to be signed by all relevant parties to the project and submitted as part of the project’s final submission, now focused on the preferred option.
4.23 Once the project details have been finalised, it will be submitted for an external appraisal designed formally to assess its contribution to the Combined Authority’s investment objectives under the SIF, including its value for money, risks, and monitoring and evaluation arrangements. The external appraisal report, which will be coordinated by the Combined Authority’s programme management office, will form an integral part of the submission pack for each project. The appraisal conducted will conform to the Single Pot Assurance Framework – National Guidance6.
4.24 It is vital for project sponsors to understand that on-going dialogue and information exchange with the Combined Authority, its consultants and appraisers will be necessary to reach the end of the diligence process, and that this process may require a significant commitment on the part of the sponsor.
Interim Review
4.25 The Investment Panel and the CA Board, which will receive regular updates on projects under consideration7, may elect for projects to be submitted for interim review before progressing to final review. Whilst interim review is intended for projects that are unusually large, complex, novel or protracted in negotiation, the Investment Panel and the CA Board will each have discretion in requiring an interim review. Projects with a
6 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/516215/Si ngle_Pot_Assurance_Framework.pdf. 7 The LEP board will receive regular updates in respect of the funding it passes for management under the SIF.
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non-repayable commitment of more than £5m or a total commitment of more than £10m will be submitted for interim review unless waived by the Investment Panel.
4.26 Projects will be submitted for interim review by the Investment Panel based on an investment report, the SIF financial commitment terms negotiated to the point of an indicative term sheet and an external appraisal report. Each of these will be updated for consideration by the Investment Panel at final review.
4.27 Projects may be rejected or approved at the interim stage, in both cases with reasoned feedback. The Combined Authority does not expect any project to be submitted at the interim stage more than twice and reserves the right permanently to exclude a project.
Final Review
4.28 Projects with satisfactory diligence, term sheet and external appraisal will be submitted for consideration at the final stage by the Investment Panel. The Investment Panel will provide final commentary to the Combined Authority on the project’s merits. The Investment Panel may in its sole discretion also provide recommendations for modifications to be made in the SIF commitment.
Combined Authority Approval
4.29 Projects recommended for approval by the Investment Panel will be submitted to the CA Board, or to a sub-group nominated by the CA Board, for final consideration8. The basis for this approval will be a summary project submission, summary appraisal submission and the Investment Panel’s commentary.
4.30 Projects approved by the Combined Authority will receive delegated authority for officers of the Combined Authority to enter into legal documentation and proceed to disbursing the SIF commitment. Projects that are rejected will received reasoned feedback. The Combined Authority reserves the right permanently to exclude a project.
4.31 For the avoidance of doubt, no project is approved until legal documentation is entered into and complete.
Short-form Approval
4.32 In order to facilitate the efficient handling of smaller projects, the CA will allow projects with a non-repayable commitment less than £1 million and/or a repayable commitment of £3 million to progress directly from outline approval to final approval.
8 This approval, and the process that precedes it, requires compliance with LEP arrangements where funds to be invested are sourced through it, including in respect of the LEP board.
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4.33 For completeness, the CA will complete the prioritisation framework for projects handled by short-form approval (and use the results of the framework in our underwriting, monitoring and evaluation work).
4.34 We summarise this investment process below:
Conditions to Funding
4.35 All public funding is provided with conditions. Besides the usual development, performance, monitoring and evaluation conditions, we may require projects to incorporate inter alia:
Actions plans co-produced as a result of examining the project’s inclusive growth potential, including in relation to gender balance, equality and diversity, and access to opportunity.
Performance requirements linked to environmental, urban and corporate best practice, and to the Metro Mayor’s other priorities. These may include requirements in relation to urban design quality, sustainability performance, digital connectivity (dig once ducting) or autonomous/electric vehicle infrastructure (charging points).
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4.36 The Investment Team will be clear in specifying these requirements before the concept stage and in incorporating them into each project’s financial appraisal.
Change Control
4.37 Projects whose forecast performance changes materially after passing any approval stage will be resubmitted to that stage. A material change is defined as follows:
Increase in funding requirement by 10% or more; reduction in base case return to the Combined Authority by 20% or more.
Deterioration of the public value proposition resulting in a base case value for money reduction of 10% or more, a breach of any minimum value for money or appraisal threshold (such as a benefit cost ratio threshold) or a significant deferral in the production of public value.
Material change in project and/or SIF commitment risk profile identified by the Investment Team or the Investment Panel which is reasonably likely to impact the project negatively.
4.38 This change control process applies to projects in the approval process, for which no binding legal documentation has been signed. The Combined Authority will address material changes to projects in the delivery phase through the provisions of their legal documentation.
Process Review
4.39 We will conduct an internal review of this Investment Strategy’s approval process, outline gateway criteria and prioritisation framework between six and nine months after launch and may update our operations as a consequence of that review.
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5 Financial model
Conditions and Recycling of SIF Funds
5.1 The SIF comprises funding from multiple sources. Each source is likely to have its own restrictions, requirements and targets. This section does not seek to describe each source in detail but rather to identify the principles which the Combined Authority will observe to guide the financial operation of the SIF and ensure that the financial model supports the delivery of the wider objectives of the strategy, independently of the funding source.
Projects
5.2 One of the Combined Authority’s long-term objectives is to tackle market failures present in the City Region’s economy, and to do so in ways that drive inclusive growth and greater opportunities for our communities and people. Intervention in these failures is predicated on the presence of a strategic plan to achieve market sustainability in an inclusive way and on the specific intervention’s contribution to this plan. In areas of persistent market failure (such, for example, as the gap between the cost and value of central office development), the Combined Authority will call for this Investment Strategy to be augmented by a specific analysis and action plan, to be used in structuring and appraising the intervention.
Products
5.3 The CA shall offer grant funding, first loss instruments, guarantees, debt (whether senior, junior, corporate or other), quasi-equity, equity and other risk sharing instruments in any combination it considers optimal.
5.4 Where the CA provides non-repayable and sub-commercial funding, it shall routinely accompany this non-repayable and sub-commercial funding with repayable and commercially priced funding.
5.5 Commercial funding will be provided only in support of this Investment Strategy and its wider objectives, not solely to pursue optimal financial returns.
Efficiency and Additionality
5.6 The CA shall provide sub-commercial funds at the lowest level needed to catalyse a project. It shall provide commercially priced funds in an amount that reflects its availability of funding, risk and return objectives, and portfolio performance.
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5.7 The CA shall use its funding to influence projects’ scale, timing and operation, seeking to optimise its outputs. It will seek to be additional in deploying its funds and avoid the crowding out of commercial funding sources.
5.8 The CA shall participate in (sub-commercial) financing opportunities only where its additionality can be demonstrated (through the increase in scale, speed of delivery and/or output or outcome intensity of a project) and shall seek actively to engage commercial investors, lenders and intermediaries on crowding in private sources of funding. Its desire to crowd in investors applies at the project and SIF levels.
Underwriting Approach
5.9 The CA shall adopt a risk-based approach in which it undertakes a comprehensive but proportionate appraisal of both the project and the LCRCA financial offer. This offer will reflect its view of risk and return (always in compliance with State aid legislation), its financial position, the outputs available through the project and the risks to their realisation, plus externalities. This risk-based approach will replace the gap-based approach that has been prevalent in the City Region.
5.10 The CA shall appraise projects with reference to its assurance framework, informed in its turn by the MHCLG Appraisal Guide, Treasury Green Book and benefit cost analysis. In analysing the risk and return of financing, the CA shall have regard to best practice in the UK financial services industry.
5.11 The CA shall structure its funding to allocate and mitigate risks to project sponsors, funders, users and stakeholders and shall use its own funding to accept a portion of these risks. In structuring its financial commitments, we shall have regard to additionality, value for money, scale of impact, outputs and the financial sustainability of our resources.
Co-investment
5.12 The CA may participate in project and financing opportunities led by related and third parties. Related parties include our underlying local authorities, central funding agencies, the Chrysalis Fund and Homes England. Third parties may include private investors, enterprises and developers, and voluntary sector organisations.
5.13 When co-investing, LCRCA may or may not lead the transaction but will under all circumstances adhere to its own underwriting and approval standards.
Equity Limits
5.14 LCRCA shall commit equity only alongside significant stakeholder (investor, management, client etc.) equity and shall remain as minority shareholder except by exception.
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Programming
5.15 Given the propensity of projects to slip in delivery, the Combined Authority will prudently over-programme its commitments until receipt of board approval and entering into legal documentation, when they become legally binding. In order to maximise the use of funds, we will over-commit:
Capital projects by up to 30%
Revenue projects by up to 20%
5.16 We shall review over-programming limits periodically.
Risk and Portfolio Management
5.17 The Combined Authority will monitor its commitments at three levels: project, programme and portfolio.
At the project level, we will monitor the project’s development, financial and operational performance from the signing of legal documentation onwards. Our interest is not only the performance of our committed finance but also the project’s success in generating the economic, social and environmental benefits foreseen at appraisal.
At the programme level, we will monitor projects against the obligations and restrictions set out for each funding stream. For example, our requirement to manage Growing Places Funds may differ from those set for Transforming Cities, and we will need to monitor our compliance accordingly.
At the portfolio level, we will monitor risk and performance principally by assessing macro-economic, concentration, financial product and political risks. (Concentration risk refers to danger of focusing too much resource into single or interdependent sectors, sponsors, stakeholders or geography.)
5.18 Where competent risk management requires changes to the Combined Authority’s strategy or priorities, the Investment Team will communicate this to the market.
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Appendix 1: Outline Assessment
5.19 The Combined Authority will treat project proposals received under “calls”, including open calls, to an outline review before committing significant time to their progression. This outline stage assesses projects for their strategic fit, public value and deliverability. The purpose of the gateway is to ensure that only projects that are fundamentally orientated to the goals of the SIF and are deliverable progress to prioritisation, diligence and commitment.
5.20 A project is assessed at the outline phase against four criteria:
A strategic fit test 5.21 Projects must meet at least one of the LCR’s strategic objectives as defined in this Investment Strategy. They must address directly at least one sectoral or cross-sectoral investment priority.
A public value and inclusive growth test 5.22 Projects must have the quantifiable potential to add public value to the communities and people of the LCR and to contribute to LCR’s inclusive growth objectives.
A market failure / investment opportunity test 5.23 The SIF will invest in projects that:
Demonstrate a clear strategic case for public investment, for example to address market failure, create public goods and value or provide the enabling infrastructure for growth, and/or;
Represent an investment opportunity for a financial return to the CA.
A deliverability test 5.24 It is essential that projects progressed to full diligence can be delivered in a timely manner. Undeliverable projects – or those with unrealistic delivery timescales – tie up funds which could be directed to more achievable projects.
5.25 Deliverability assessment is not always straightforward, and the specifics will vary from case to case but the submissions of deliverable projects should robustly demonstrate these key attributes:
Timescales, costings and risk assessments that are comparable with the experience of successful comparable projects in comparable operating environments.
Proposed project leadership / delivery structures with experience of managing similar kinds of projects.
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Credible business plan, operational and financial standing of the sponsor and project stakeholders.
5.26 In order to make this assessment, we will request information that provides a clear view of the project’s purpose, delivery, operation, risks and exit. It is feasible at this stage that different delivery options are available, and we will seek to understand these options in full, requesting supporting information for each.
5.27 As a minimum, we will request, in written format:
Project A description of the project and its objectives, including the options that may be considered to reach those objectives. The objectives will typically be the factors motivating the project’s sponsors, funders and key stakeholders to undertake the project
Development and operation A business plan that includes the scope, scale and timing of the project’s development and operation
Funding A financing plan that includes sources, quantum, likely headline terms and status of approval of the funding necessary to deliver the project
Organisation and Personnel Organisational structure for the project sponsor and contributors
The proposed legal approach (legal structure) to be adopted
Audited financial statements / statement of financial position
Risks Headline project risks with a focus on delivery risks
Team and Track Record Biographies of key personnel associated with delivery and operation of the project
Summary evidence, whether by reference to previous projects, case studies, corporate performance or other, of the sponsor’s and its team’s previous experience in delivering comparable and equivalent projects
Approvals Description of the key steps, approvals, authorisation, agreements partnerships and other permissions required to deliver the project, with summary commentary on the steps necessary to complete that step
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Appendix 2: Prioritisation framework
5.28 At the project stage, we will prioritise projects using a single, simple methodology. The aim of this methodology is to compare projects’ contribution to our objectives across different sectors, and to identify the most compelling projects from a range of options. The results of prioritisation will be provided to the Investment Panel in addition to the Investment Team’s concept stage report and the Investment Panel project will consider the project on the basis of both results and report.
5.29 The criteria assessed will be:
Strategic fit
Financial return in NPV terms.
Outputs – converted into a single NPV financial metric.
Leverage and additionality – relative sum of external funding levered and not displaced.
Project risks and their mitigation.
5.30 Each criterion is given a score which is weighted in the following proportion:
Strategic fit – out of 25 points
Financial return – out of 25 points
Outputs – out of 20 points
External funding leveraged – out of 15 points
Risk / deliverability – out of 15 points (where a lower risk rating achieves a higher score)
5.31 Therefore, each project is able to achieve a maximum score of 100 points. The higher the score achieved, the higher priority the project.
5.32 The following sections describe the scoring process for each criterion.
Strategic fit 5.33 Section 2 sets out our strategic investment priorities. The submission should be clear how the project in question supports the strategic investment priorities of LCR. To do this, it should set out a clear logic for how the intervention will address one or more of the priorities, and evidence that this logic is robust.
5.34 This evidence could be drawn from the experience of projects in the LCR, or from outside the area, but it should be as specific as possible and cite facts rather than rely on
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generalities. The logic underpinning the submission should be straightforward and robust.
5.35 Projects which do not credibly demonstrate that they will address one or more of the strategic investment priorities will be rejected.
5.36 The submission will identify which of the strategic investment priorities will be addressed by the investment. A single project can – and hopefully will – address more than one of the priorities.
5.37 For each priority the level of impact will be assessed as high / medium / low.
5.38 Where a project is considered high impact it receives 3 points. Where a project is considered medium impact it receives 2 points. Where a project is considered low impact it receives 1 point. If the project is considered not to impact the strategic investment priority in question then it receives no points.
5.39 The project is scored in this way against each relevant criterion. By summing together the individual impact scores a project receives a total impact score. This number is divided by 20 to get a percentage, where 20 is considered to be the upper limit for impact. If the total impact score is higher than 20 then the percentage is 100.
5.40 The percentage is multiplied by the total number of points allocated to strategic fit (25), to give a score for strategic fit.
5.41 For example:
Project 1 is considered to have a low impact addressing strategic criteria A, B, C, D, and E. It receives a total impact score of 5. This is divided by 20 to get 25%. In turn, 25% is applied to the total possible points for strategic fit – 25 – to get a total score for strategic fit of 6.25.
Project 2 is considered to have a medium impact addressing strategic criteria A, B, and C, and a high impact addressing strategic criteria E. It receives a total impact score of 9. This is divided by 20 to get 45%. In turn, 45% is applied to the total possible points for strategic fit – 25 – to get a total score for strategic fit of 11.25.
Project 3 is considered to have a high impact addressing strategic criteria A, B, C, D, E, F and G. It receives a total impact score of 21. Since this is higher than the maximum possible score it automatically gets 100% of the total possible points for strategic fit – 25.
5.42 The aim of this process is to give greater weight to projects that have a greater impact over a wider range of priorities.
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Financial return 5.43 The SIF as an investment programme should aim to generate a financial return, though not necessarily on all of the individual projects. The portion of non-recyclable funding will be driven down over time as SIF takes receipt of funding from other projects.
5.44 There must be a clear investment logic as to how the SIF investment will generate a financial return. This should be as specific as possible, and cite facts rather than generalities. Appendix 2b provides more detail about the kinds of evidence that can be used to demonstrate robust investment logic.
5.45 As part of the submission, the Investment Team will prepare or request a NPV cash flow indicating the financial return of the project overall and the financial return to the CA.
5.46 The NPV cash flow will be assessed over the SIF commitment’s lifetime up to maximum 20 years at a discount rate of [6]% per annum.
5.47 The return to the CA will be divided by the total CA investment to get a percentage return.
5.48 For the purposes of scoring the level of financial return, a ‘return ceiling’ of 300% is set. The percentage return is divided by the ‘return ceiling’ – and this is multiplied by the weight of financial return in the model (25 points). Where the financial return is equal to or higher than the ‘return ceiling’, the project receives all 25 points as a score for financial return.
5.49 The returns to other organisations, whether public, private or third sector, are not considered as part of this process.
Outputs 5.50 As part of the submission, the project sponsor will produce an evidenced analysis of expected outputs plotted over the next 20 years.
5.51 Outputs should be converted into economic returns (expressed in £ values) to the City Region using HM Treasury Green Book compatible methodologies in line with existing evidence and / or ready reckoners. The Investment Team, in collaboration with the Combined Authority’s programme management office, will use agreed norms to select the methodology to apply to each project.
5.52 These output values are plotted over a 20 year time horizon in NPV terms, with the discount rate set at [6]%. This gives a total NPV value of outputs that is comparable across different project types.
5.53 This ‘output return’ to the CA will be divided by the total CA investment to get a percentage return.
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5.54 For the purposes of scoring the level of output return, a ‘return ceiling’ of 1,000% is set. The percentage return is divided by the ‘return ceiling’ – and this is multiplied by the scoring weight of outputs in the model (20 points). Where the output return is equal to or higher than the ‘return ceiling’, the project receives all 20 points as a score for outputs.
5.55 The aim of the outputs score is to prioritise projects that lead to greater practical outputs (jobs, homes, apprenticeships, etc.) for LCR.
Leverage 5.56 As part of the submission, the project sponsor will describe the amount of leverage over the next 20 years. The NPV of this leverage will be assessed over a 20 year timescale at a discount rate of [6]% per annum.
5.57 The NPV of leverage will be divided by the total CA investment to get a ‘leverage return’.
5.58 For the purposes of scoring the amount of leverage achieved, a ‘return ceiling’ of 500% is set. The percentage return is divided by the ‘return ceiling’ – and this is multiplied by the scoring weight of leverage in the model (15 points). Where the amount of leverage achieved is equal to or higher than the ‘return ceiling’, the project receives all 15 points as a score for leverage.
5.59 The aim of the leverage score is to prioritise projects that achieve greater leverage, and so amplify the impact of the CA’s investment.
Risk / Deliverability 5.60 As part of the submission, the project sponsor will create a detailed risk register and a more detailed project plan.
The project will be assessed for risk on a four-point scale as follows:
High risk: 0 points
Medium risk: 5 points
Low risk: 10 points
Very low risk: 15 points
Appendix 2b provides a schema for assessing different kinds of risks on different projects.
The aim of the risk / deliverability score is to prioritise projects that have lower risk / better mitigation in place.
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Scoring the prioritisation
5.61 The total prioritisation score for the project is simply the sum of the scores of the different criteria. All scores are out of 100. The higher the prioritisation score, the higher priority the project is for investment via SIF.
5.62 In summary, projects will score more highly if they:
Demonstrate a higher level of strategic fit and a greater impact towards strategic priorities.
Demonstrate a higher level of financial return to the CA, leveraged funding, and economic outputs – and where these returns / outputs occur sooner rather than later.
Demonstrate lower levels of project risk.
5.63 Prioritisation scoring is carried out using the prioritisation spreadsheet which is available from [web address]. Project promoters can use this to optimise their business cases ahead of submission.
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Appendix 2a: Typical Requirements for concept submission
5.64 The Investment Team will typically obtain the following – to the extent not already received for the outline stage – before submitting any project to the concept stage.
Market Assessment of the market / environment in which the project will operate, including competitive position
Statement of need, relating to the economic, environmental and social needs that the project will address
Organisation Organisational structure for the project sponsor and contributors
The proposed legal approach (legal structure) to be adopted, including in relation to State aid
Audited financial statements / statement of financial position
Business plan Outline business plan for the delivery and operation of the project, noting that the sponsor may at this stage be considering different delivery options. Information should be provided for each option.
Outline financing plan (including SIF funding)
Proof of funding commitment from the sponsor and third parties (e.g. heads of terms for third party debt), outlining the quantum, terms and headline conditions that obtain to the funding
Project risk assessment, including impact weighted risks and mitigations.
Personnel and Team Biographies of key personnel associated with delivery and operation of the project
Track Record Supporting evidence, whether by reference to previous projects, case studies, corporate performance or other, of the sponsor’s and its team’s previous experience in delivering comparable and equivalent projects
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Disqualifying criteria
5.65 In addition to the above minimum information requirements, no project will be eligible for submission without:
For land and property, housing projects: Clear ownership of land and assets or an agreed route to ownership of those assets
Acceptable land value contribution. The CA will typically consider land at the lower of cost and value
For infrastructure projects: Non-binding letters of support from the key project stakeholders, agencies, landowners and authorities
For business support projects: Evidence of support from and evidence of engagement with the relevant sector, the engagement and commitment of any relevant provider, engagement with any relevant public authority or agency, including Growth Hub support where relevant.
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Appendix 2b: Guidance on project assessment
5.66 This Appendix provides guidance on the prioritisation process. It is aimed primarily at supporting the business case assessment process. It is also designed to help project promoters and developers who are working to develop a robust business case.
5.67 The Appendix has the following sections:
Assessing market failure / investment opportunity
Assessing deliverability of projects
Determining strategic fit and impact
Assessing financial return
Assessing project risks
Assessing market failure / investment opportunity
5.68 The SIF will invest in projects that either:
Demonstrate a clear strategic case for public investment, for example to address market failure, create public goods and value or provide the enabling infrastructure for growth, and/or;
Represent an investment opportunity for a direct financial return to the CA on any SIF investment.
Market failure 5.69 Market failure is defined as any situation where the market is not expected to provide an economically or socially beneficial outcome to the desired extent, at all or within an optimal timeframe. This often happens where the private sector cannot capture all of the benefits of investment (i.e. when many of the benefits are social / economic rather than financial return).
5.70 In part driven by the market’s inability to provide the full cost of capital, we will invest in the infrastructure that enables wider growth and inclusion. This could include transport, digital, social and other infrastructure. In other cases, such as investment in residential or commercial property, market failure is very much dependent on the specifics of a given investment.
5.71 We may also invest in public goods and public value, where the wider benefits to the people and places of the city region are the primary return on investment.
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5.72 The SIF Investment Team and/or project promoter will identify and evidence the market failure relating to the project in question. The project assessors will consider whether the reason and evidence given qualify as market failure. This should be considered in light of other private and public sector projects of a similar nature.
Investment opportunity 5.73 On occasion, LCR will have opportunities to invest that generate financial returns which can be used to support ongoing investment in the City Region. Examples of this include:
Investing in property in the City Region that is consistent with our strategic objectives and generates a financial return
Investing in promising, innovative firms in the City Region that helps these firms grow and can be expected to generate a financial return
Incentivising internationally mobile investment
Investing in IP in a way which supports local firms to grow and can be expected to generate a financial return
Assessing deliverability of projects
5.74 As part of phase one, project assessors must check whether a project is realistically deliverable within the proposed timeframe. The following is a series of questions which should be asked of the projects and their promoters:
Is this project similar to other projects that have successfully reached completion in comparable environments? If so, were those other projects successful in terms of being delivered on time and to budget? Have any similar projects stalled and, if so, why have they stalled?
Where deliverability challenges have occurred on comparable projects, what differences are there in this project that mitigate similar issues occurring, and / or what mitigating steps are planned?
Are there any particular challenges to the proposed project that are different from other typical projects of this type? What mitigating steps are planned?
Does the project promoter / delivery body have a track record of managing similar projects? If not, what steps are being taken to mitigate the knowledge / experience gaps that may exist?
Is the proposed project management / delivery team adequately resourced?
How could deliverability failure manifest itself and what would the implications be? (in terms of time and cost).
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Is the submission sufficiently detailed and evidenced to be credible?
5.75 Projects that are similar to previously successful projects (particularly successful LCR projects), and projects which are to be delivered by credible organisations, should be considered more deliverable than projects which do not meet these criteria.
5.76 Projects that have more probability of serious failure (resulting in large time delays or cost overruns – or both) should have a higher evidence requirement than those where the consequences of failure are less serious.
Determining strategic fit and impact
5.77 One of the most challenging areas of assessment is determining the extent to which a project meets one or more strategic priority of LCR. Determining strategic fit happens in both phases of the prioritisation process:
In the first phase, determining strategic fit is concerned with the logic of an intervention and evidence that the logic is, or can be made, robust.
In the second phase determining strategic fit is also about to what extent the intervention addresses the strategic priorities of LCR.
First phase strategic fit assessment 5.78 In the first phase, a determination of strategic fit should focus on the logic of intervention – i.e. how does the intervention address a given strategic priority - and the evidence that underpins that logic. For some of the strategic priorities this will be straightforward. For example, if the strategic priority is to build a particular piece of infrastructure and the intervention proposes to do just that, then the link is clear.
5.79 In most cases, however, the link between project and strategic priority will involve at least some logical ‘leaps’ between what is being funded and what will happen. For example, a strategic priority to increase employment in a given sector might be fulfilled by funding a local start-up programme, but here project assessors should consider whether:
Start-ups are the correct means to increase employment – i.e. is the sector amenable to successful start-ups or is it heavily capital intensive and therefore difficult for new entrants? Do start-ups in this sector tend to grow rapidly or are very small / micro companies the norm?
Assuming start-ups are a reasonable way to boost employment – are the means proposed sufficient to support additional start-ups? Is there good evidence of demand to start-up such firms? (e.g. perhaps a large local supply of graduates in relevant technical areas)
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5.80 In the above example, the project promoters make at least two logical ‘leaps’: firstly, that start-ups increase employment in the target sector (the strategic priority), and secondly that the proposed support package leads to more start-ups.
5.81 It is incumbent upon the project team to identify the causal logic in their proposed interventions and how these address the strategic priorities, and provide evidence that supports this logic. Project assessors should question this logic and evidence.
5.82 Suitable evidence to support project proposals includes:
Data and evaluations of comparable projects in comparable environments that demonstrate the causal logic of the intervention proposed, with acknowledgement of where the context in LCR differs.
Data demonstrating demand for particular interventions, where such demand is an important driver of an intervention’s success. For example, where commercial occupiers are needed to ensure the success of a high street redevelopment, or where prospective students are needed to ensure the success of a new course or FE facility. Such demand data could include feedback from key local stakeholders, survey data, and other data which implicitly demonstrates demand (e.g. rising house prices in a particular area).
Data demonstrating existing supply of / competition for particular interventions, where such supply is an important driver of an intervention’s success. This is an important corollary to data on demand. If house prices are rising, but many new housing sites are being brought forward then the logic for intervention in the market is weaker than if there are very few active developments. Sometimes supply data tells a more accurate picture of how likely it is that an intervention will succeed. For example, if there are already lots of STEM courses on offer in local colleges but take-up is low, the correct intervention will focus on boosting take-up, or improving the quality of the existing offer, rather than further boosting supply.
Second phase strategic fit assessment 5.83 In the second phase, the aim of project assessors is to try and quantify strategic fit / impact in a consistent way across projects. Given that the project outputs are assessed separately, this is less about the numbers of outputs achieved and more about whether the project meaningfully advances the LCR’s progress towards its strategic objectives, and in what domains. Although these two elements (outputs and progress towards strategic objectives) overlap to a degree, there is a distinction between the two.
5.84 In order to simplify this assessment, there are three levels of impact for each strategic priority:
High impact – i.e. the proposed project either completes the strategic priority or makes very significant progress towards its achievement.
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Medium impact – the proposed project makes some progress towards the achievement of this strategic priority, but further interventions are required to have a ‘high impact’.
Low impact – the proposed project makes a small amount of progress towards the achievement of the strategic priority.
5.85 Of course, projects will not impact all of the LCR’s strategic priorities, so the above is only relevant for those priorities which are anticipated to be impacted by the project.
5.86 Progress towards a particular strategic priority must be tangible / realistic, not hypothetical. For example, it may be that a business loan programme will lead selected employers to invest in upskilling their workforce. However, unless this is an intrinsic part of the programme (e.g. if loans are conditional on having a robust training plan), such a benefit is hypothetical rather than a natural consequence of the intervention and so there should be considered to be ‘no impact’ for that particular strategic objective (i.e. relating to upskilling). As best as possible, project assessors should seek to be consistent with previous judgements on impact.
Assessing financial return
5.87 Financial return is assessed on a Net Present Value (NPV) basis to account for the opportunity costs associated with longer-term return profiles. As such, projects which show shorter-term financial returns will score more highly. Financial return to other bodies (private investors or local authorities) is not assessed as part of this process, on the basis that these organisations can and will manage their own assessment.
5.88 As part of the assessment of financial return, the investment team will review the assumptions about the returns from investment and the timescales for those returns. Project promoters should provide a clear model of assumptions, and evidence that supports said assumptions. Examples of suitable evidence include:
Financial returns data from similar projects.
Where the project involves loans – an assessment of the loan risk either individually or an assessment of the portfolio loan risk.
Financial modelling with clear and evidenced assumptions.
5.89 Where evidence is lacking, but the project promoter is prepared to guarantee the CA’s financial return, then this should be considered provided that such a guarantee is credible.
5.90 Where assumptions are deemed to be unrealistic, the project assessors should request a revised submission that incorporates more realistic assumptions.
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Assessing project risks
5.91 As part of the submission, the project promoter should produce a risk register showing the major project risks, the likelihood of these risks (very low to very high), the impact of the risks (very low to very high), and the mitigating actions that have or will be put in place to address these risks. Where the link between mitigation and risk reduction is not obvious, evidence should be provided that the risk will actually be reduced.
5.92 The project assessor should:
Consider whether the identified risks represent all the important risks that could occur
Consider whether the project sponsor’s assessment of likelihood and impact is realistic
Consider whether the mitigating activities will credibly reduce the risks identified based on the evidence provided
5.93 Subsequently, the project assessor should decide on the level of risk inherent in the project. By ‘project risk’, we mean the risk that a project will fail to meet its objectives in terms of:
Outputs achieved (quality or quantity)
Proposed timescales being attained
Proposed financial return to the CA being attained
Proposed financial leverage being attained
5.94 Accordingly the project should be judged according to the following risk categories:
High risk: a project is unlikely to meet one or more of the above objectives to the detriment of the overall objectives of the project or the CA as a funder
Medium risk: it is reasonable to think that the project may fail to meet one or more of the above objectives to the detriment of the overall objectives of the project or the CA as a funder
Low risk: it is reasonable to think that the project will meet all of the above objectives.
Very low risk: it is very unlikely that the project will fail to meet any of the above objectives.
Page 216 Agenda Item 12
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT AND PORTFOLIO HOLDER: INCLUSIVE GROWTH, ECONOMIC DEVELOPMENT, DIGITAL AND INNOVATION
LIVERPOOL CITY REGION SINGLE INVESTMENT FUND
1. PURPOSE OF REPORT
1.1. The purpose of this report is to seek a Combined Authority decision on a Full Business Case submitted for funding from the Single Investment Fund and to delegate authority to the Director of Commercial Development & Investment and Interim Head of Paid Service regarding negotiations of the grant funding agreement.
2. RECOMMENDATIONS
2.1. It is recommended that the Liverpool City Region Combined Authority approve:
(a) The Full Business Case in relation to the Parkside Link Road and award Single Investment Fund in the sum of a maximum capital grant of £23,790,786 subject to the conditions contained in Appendix 1, paragraph 2.9 (b) Require that the project perform under the timing and delivery requirements to be established by the CA in its grant funding agreement (c) Grant authority to the Interim Head of Paid Service to negotiate detailed terms of the ensuing grant funding agreement in consultation with the Combined Authority Monitoring Officer and Combined Authority Treasurer
3. BACKGROUND
3.1. A Full Business Case application has been received from St Helens Council for the Parkside Link Road project and a detailed appraisal has been undertaken in line with the Single Investment Fund Assurance Framework. The Parkside Link Road project is now eligible for consideration by the Combined Authority.
3.2. The appraisal adheres to the agreed Single Investment Fund appraisal criteria which is compliant with the HMT Green Book Guidance. The appraisal has considered all aspects of the business case including: Page 217
Strategic Case Economic Case Finance Case Commercial Case Management Case
3.3. The appraisal is appended to this report as Appendix 2 and is summarised in Appendix 1.
3.4. It should be noted that this represents a Key Decision due to the scale of investment requested. A Key Decision Notice has been prepared and published for this project.
4. RESOURCE IMPLICATIONS
4.1. Financial
4.1.1 The Combined Authority Treasurer has confirmed that the proposed funding request can be accommodated as part of the overall Single Investment Fund allocation.
4.2. Human Resources
4.2.1 The Investment Team and Legal Team will lead the negotiation of the Grant Funding Agreement and the Programme Management Office will have responsibility for managing the delivery of the Combined Authority’s investment.
4.3. Physical Assets
The physical assets to be created by the project are fully detailed in the appraisal report.
4.4. Information Technology
The approval of funding will not give rise to Information Technology issues.
5. RISKS AND MITIGATION
5.1. The Grant Funding Agreement between the Combined Authority and the applicant will seek to ensure to the extent achievable that risk to the Combined Authority is managed, including in relation to State Aid.
5.2. Individual project risks are identified and considered as part of the independent appraisal process. The Programme Management Office will be responsible for ensuring that during delivery risks are understood and that the applicant takes necessary steps to mitigate these.
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6. EQUALITY AND DIVERSITY IMPLICATIONS
6.1. Equality and Diversity implications are considered as part of the appraisal process and relevant considerations are set out in the appendices.
7. COMMUNICATION ISSUES
7.1. All projects approved will be subject to the Combined Authority’s branding guidelines and publicity requirements placed upon them as part of the Grant Funding Agreement. In addition the Combined Authority will, through its adopted communication protocols, publicise the award of funding to the projects and the associated envisaged outcomes.
8. CONCLUSION
8.1. This report presents the Parkside Link Road project for Combined Authority approval at Full Business Case stage and to give approval to the Interim Head of Paid Service to proceed with the negotiation of the Grant Funding Agreement.
MARK BOUSFIELD Director of Commercial Development and Investment
COUNCILLOR P DAVIES Portfolio Holder: Inclusive Growth, Economic Development, Digital and Innovation
Contact Officer(s): Mark Bousfield, Director of Commercial Development and Investment
Appendices: Appendix 1 – Parkside Link Road Summary Appendix 2 – Parkside Link Road Full Appraisal
Background Documents: Nil
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Appendix 1
Parkside Link Road Summary
1. PROJECT DESCRIPTION
1.1 The Parkside Link Road is a significant infrastructure project for the Liverpool City Region and the North of England. The project is being brought forward by St Helens Council and involves the construction of a new 3.3km road linking Junction 22 of the M62 and the local road network around Newton-le-Willows. The project will deliver a new single/dual carriageway and realigned highway with junctions. The link road will also include provision for cycleways and footpaths.
1.2 The infrastructure will also serve to unlock significant commercial development and wider economic benefits. Parkside Regeneration LLP, a joint venture between St Helens Council and developer Langtree, propose to transform the former Parkside colliery site into a new large-scale employment site. In addition, there is future potential to deliver a new Strategic Freight Interchange (SRFI) linking lines heading both north-south and east-west. The new link road is therefore the first piece of a transformational growth scheme for the City Region.
1.3 The total project costs are estimated to be £39.810m which includes the new link road and pro-rated land acquisition costs. The Council is requesting a SIF commitment of £23.790m. It is proposed that SIF investment is used to co-finance the construction of the new link road only. Investment from St Helens Council will fund a number of strategic land acquisitions.
1.4 An independent appraisal of the project has been commissioned by the Combined Authority and the findings are summarised below.
2 APPRAISAL OF THE PARKSIDE LINK ROAD
2.1 SIF investment is proposed to be directed in its entirety towards the construction of the new link road. External consultants Cushman & Wakefield have undertaken the appraisal with specialist transport advice and input from Systra.
2.2 Core Criteria: Fit with SIF Prospectus, Growth Strategy and other relevant strategies
i. The appraisal concludes that the project offers a good strategic fit with the LCR Growth Strategy and the priorities in the SIF Prospectus.
ii. The appraiser notes that the project demonstrates alignment with the Growth Strategy’s three pillars; productivity, people and place. Specifically the indirect creation of new employment space will make a positive contribution to the manufacturing and logistics growth sectors in the City Region. In addition, there is clear alignment to the priority of ‘improving physical connectivity’ and the future development of an ‘integrated multi-modal transport system’ is a strategic aspiration for the City Region.
2.3 Core Criteria GVA and Jobs: a clear case that the project will deliver relevant activities and outputs that will lead to GVA and Jobs
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i. The rationale for the project is to deliver a new strategic link road and open up large scale regeneration and employment opportunities. The appraiser has considered the projected impacts, the gross job creation and the net job creation impacts. In addition, the GVA has been estimated as part of the appraisal.
ii. It is estimated that the construction of the link road would contribute to the direct creation of 488 construction jobs of one year in duration (49 FTE jobs). When the appraiser’s additionality assumptions are applied to the construction job estimate it is projected that the link road will create a GVA impact of c. £7.6m. The appraiser identifies a Net Present Public Value of £34.863m for the link road project.
iii. The link road will be a critical enabling component for the wider commercial development which will bring indirect economic benefits to the City Region, relating to several phases of industrial and logistics development. This is likely to drive net additional GVA of £850m. Additional GVA benefits are also likely to arise from improved journey times and reliability.
2.4 Core Criteria Additionality: a clear case that the intervention would not otherwise take place or would take place at a reduced level, happen later or be of lower quality
i. As a critical piece of enabling infrastructure there is a robust argument that without public sector intervention the new link road would not be delivered. The absence of private sector appetite to cover significant infrastructure costs is evidenced by the lack of development activity despite active promotion of the opportunity over many years.
ii. The appraiser states that the project demonstrates an adequate additionality argument. The application presents four delivery options including a do nothing approach, deliver a smaller and less effective option or deliver an alternative but more expensive design. These are considered to be appropriate with a clear case presented for selection of the preferred option.
iii. Additionality assumptions have been applied to the job estimates which reduces the gross to net job figure from 488 (49 FTEs) to 241 (24 FTEs).
2.5 Core Criteria Value for Money: ratio of net additional GVA to net public sector cost (SIF funding only)
i. The proposed scheme, as judged by the appraiser, will deliver the economic benefits displayed in the table below. Note that indirect impacts relate to the delivery of wider commercial development.
LCR Level Gross Impact Net Impact FTE Jobs (including indirect Direct – 49 Direct – 24 employment effects) Indirect – 6,022 Indirect – 2,979
GVA (£million) Direct – £7.6m Indirect – £850m
Public sector cost per job (SIF cost Direct – £611,000 Direct – £1.24m only) Indirect – £5,000 Indirect – £10,000
BCR 1.991 rising to 3.86 on full build out of resulting
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employment space (subject to final WebTAG appraisal). The CA is able to consider the higher number in its decision making.
Hurdle Criteria
2.6 The LCR appraisal assurance framework includes several hurdle criteria. These criteria are applied and assessed to establish if the applicant has the necessary management and financial capability to deliver the project. This includes demonstrating that the project has met all statutory requirements and is capable of defraying SIF expenditure in the timescale set out.
2.7 The appraiser has indicated that as the scheme is still being developed and the application, at this stage, can satisfy some, but not all, of the appraisal criteria. Once the detailed design has been completed and a ‘fix’ on costs is achieved all other appraisal criteria can be confirmed.
2.8 A state aid review has been undertaken by advisors DWF confirming that the CA investment is creating general public infrastructure, satisfying the public sector’s requirement on identifying a state aid compliant approach.
2.9 Overall the appraiser’s view is that the project demonstrates a strong strategic case with good alignment with relevant City Region strategies. The economic case for the SIF investment when focused on the full Parkside regeneration scheme is very good. In order to instigate the new link road there are a number of delivery obstacles the applicant will need to overcome including land and planning. Further work is required to complete the transport appraisal, finalise project cost and land work ownership, and confirmation is required in respect of the financial contribution from Parkside Regeneration LLP. Consequently, the project is recommended for approval subject to the following conditions:
i. A WebTAG compliant appraisal of the scheme is completed which illustrates the benefits of the investment and provides a final Benefit Cost Ratio which is acceptable to the CA; ii. Detailed design work is completed and final cost and design information is provided to the CA; iii. The applicant will be responsible for any cost increases to the budget or overruns during delivery. Cost savings should accrue 100% to SIF; iv. No project expenditure incurred pre-CA approval will be eligible for SIF funding; v. Land ownership of all required parcels is to be evidenced; vi. Full planning permission is to be secured for the new link road; vii. Confirmation of the security of the private sector match funding towards the cost of the new link road from Parkside Regeneration LLP; and viii. An agreed development programme is provided.
Investment Panel Advice
2.9 The LCR Investment Panel met on 3 October 2018 and considered the project and the appraisal of the FBC. The panel recognised the strategic value of the proposal and the benefits it will bring to the City Region. The panel recommended that the CA negotiate with St Helens the commercial conditions of its SIF commitment and to enter into a grant funding agreement once satisfied.
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3 RESOURCE IMPLICATIONS
3.1 Financial Implications
3.1.1 Approval of the Parkside Link Road will commit a maximum of £23.790m SIF grant funding which is currently forecast to be claimed per the profile below:
FY 2018/19 FY 2019/20 FY 20/21 Total £0m £23.790m £0m £23.790m
3.1.2 The LCR CA will monitor the delivery of the project within the funding envelope agreed through established provisions in the Funding Agreement.
4 RISK AND MITIGATION
4.1 Four principle areas of risk have been identified and will need to be carefully monitored. They relate to land assembly, achievement of detailed planning permission, stakeholder engagement and cost management.
4.2 The project team at St Helens Council acknowledge these delivery risks and will be working collaboratively with all key partners to ensure they are mitigated through the coming months.
4.3 It should be noted that the SIF investment will be conditional on a number of delivery risks and commercial balance being satisfied. St Helens Council will be responsible for managing these risks to enable works to commence on site in 2019 and SIF timescales to be achieved.
MARK BOUSFIELD DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT LCR Combined Authority
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Appendix 2 - LCR CA SIF Appraisal Report – Full Business Case
Assessment scoring
Core selection criteria scoring
SCORE DESCRIPTION 0 poor or unsatisfactory response giving rise to serious concerns about meeting the criteria 1 weak response suggesting there are shortcomings of a less serious nature in meeting the criteria 2 adequate response suggesting that the criteria is likely to be met, albeit only just 3 good response giving confidence that the criteria will be satisfactorily met in all relevant respects 4 very good response giving a high level of confidence that the criteria will be fully met and exceeded, offering added value and further improved outcomes
Hurdle criteria scoring
Assessment DESCRIPTION Unsatisfactory response either gives rise to concerns about meeting the criteria or there is insufficient evidence provided Satisfactory response giving confidence that the criteria will be met
Project Name Parkside Link Road Project number SIF0011 Project theme Transport
Documents submitted and status Strategic Outline Case - Approved Outline Business Case – Approved Full Business Case – Subject of this appraisal Lead organisation St. Helens Council Total project cost £39.81m – Total Project Cost SIF grant/loan requested – capital or revenue £23.79m – Total Capital Grant
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Core selection criteria
Fit with SIF Prospectus/Growth Strategy/other relevant strategies (effectiveness) o the proposed intervention contributes to the objectives set out in the Growth Strategy/SIF Prospectus and, if relevant, other strategies (refer to Questions 1-5)
Assessment criteria: scored
0 1 2 3 4
Appraiser’s score
Appraiser’s comment The applicant demonstrates fit with the LCR Growth Strategy’s Vision for a ‘competitive City Region’ and Mission to ‘attract and develop more businesses’ and ‘create more sustainable employment and high value jobs’. The delivery of new development, attraction of investors, businesses and employment, together with new strategic highway linkages will contribute to the LCR Growth Strategy target outcomes of an additional 20,000 businesses; 100,000 new jobs; and £22bn GVA by 2040. Alignment is made with the Growth Strategy’s three growth ‘pillars’: - Productivity – supports the aspiration for ‘sustained economic growth’ through the (indirect) creation of new employment space. However, no mention is made of the project’s contribution to the targeted ‘advanced manufacturing’ and ‘logistics’ growth sectors within this pillar, and of which this project is relevant. - People – contributes to ‘improving skills and talent’ through the generation of employment opportunities. - Place – clear alignment made to the priority of ‘improving physical connectivity’ through the creation of the new link road which will improve journey times and open up a site to new employment opportunities. The development of an ‘integrated multi-modal transport system’ is a key theme to this pillar but is not mentioned by the applicant. Overall, as a ‘transport infrastructure’ project within the SIF Prospectus ‘transport and other infrastructure’ theme, the scheme meets the requirement to contribute to the identified Growth Strategy priorities in respect of capitalising on the Atlantic Gateway and Northern Powerhouse initiatives and the development of an integrated multi-modal transport system for the City Region.
The applicant demonstrates fit with wider relevant local and
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national strategies, and highlights how the Parkside project is specifically identified within some: - National Policy Statement for National Networks - National Planning Policy Framework (NPPF) - Transport for the North Freight and Logistics Report - LCR Transport Plan for Growth - St Helen’s Core Strategy (2012) and emerging Local Plan Preferred Options (2018-33)
GVA and jobs o clear case that the investment will deliver relevant activities and outputs that lead to GVA and jobs. Greater weight should be attached to direct rather than indirect jobs (refer to Questions 15 and 16)
Assessment criteria: scored
0 1 2 3 4
Appraiser’s score
Appraiser’s comment The rationale for the investment is to deliver a new link road and cycleway that opens up development, investment, regeneration and employment opportunities. The applicant has undertaken its own assessment of estimated economic outputs. Their approach is stated to have drawn upon recognised impact and additionality benchmarks and are considered as follows: 445 direct person years of construction employment - The direct job outputs (those that are dependent on the investment) will relate only to those associated with the construction of the link road. The applicant’s estimate is based on the stated link road spend (£35.1m) divided by an average spend per year of employment (£78,774) derived from HCA labour coefficients. Our calculations based on 2015 HCA labour coefficients would indicate 13.9 jobs for every £1 million of construction output for infrastructure projects. This would equate to c.488 construction jobs of one year in duration, higher than the applicant’s estimate. As there is currently no firm commitment to deliver any new build floorspace as part of the SIF funding the full-time tenant jobs and investment in the floorspace created cannot be claimed as direct outputs. It is however clear that the link road is a critical enabling component to the wider development that would not be accessible or viable without public sector investment. As such, they are considered indirect. The indirect jobs created by the development will be significant.
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Based on the indicative development schedules and drawings provided to inform and evidence the quantity and type of floorspace capacity the applicant estimates: - 6,952 indirect tenant jobs – Based on a floorspace estimate for the full scheme (Phase 1, 2 and SRFI logistics - 486,600 sq m GEA) and an assumption of 70 sq m per FTE job in line with HCA Density Guidance for ‘Final Mile Distribution Centres’ and supported by evidence from Prologis is considered a sound estimate. However, the calculation does not take into account the c.5% office provision identified within the illustrative masterplans which could increase this figure. - 3,543 person years of indirect construction jobs – based on construction spend of £388m (Phases 1, 2 and SRFI logistics) and an average spend per year of employment (£109,518) derived from HCA labour coefficients. Our calculations based on 2015 HCA labour coefficients would indicate 10.0 jobs for every £1 million of construction output for private industrial projects. This would equate to in the order of 3,880 FTE construction jobs of one year in duration, marginally higher than the applicants estimate. The applicant estimates a net GVA of £14 million which is stated to have been based on net construction (direct) jobs associated with the link road (31 FTE at £51,000 average logistics and construction sector, and applying applicant’s additionality assumptions). The calculations have not been updated since OBC stage and relate to previous GVA estimates. Our assessment based on our construction job estimate for the link road only (49 FTE), output (£57,000 civil engineering) and additionality assumptions suggests a net direct GVA closer to £7.6 million. The indirect GVA in respect of the tenant jobs within the new floorspace has been estimated at £1,020m net, although it is unclear how this figure has been calculated. Our calculation suggests a net additional GVA of £850m on the indirect jobs – notably lower than that indicated.
Whilst not stated, additional GVA benefits from the delivery of the new link road could be accrued though improved journey times and reliability.
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o additionality of the project – clear case that the intervention would not otherwise take place, will have low levels of displacement, would be smaller, happen later or be of a lower quality (refer to Questions 13, 15, 16 and 21)
Assessment criteria: scored
0 1 2 3 4
Appraiser’s score
Appraiser’s comment As requested, a minimum of four options have been considered by the applicant that demonstrate the additionality of the project as proposed i.e. that the Parkside project would: - Not be deliverable for the foreseeable future without SIF support owing to a lack of private sector appetite to cover the significant upfront infrastructure costs required as evidenced by a lack of progress despite promotion of the site over the last 15 years (do nothing option); - Would be a smaller and less cost effective scheme with fewer regenerative outputs if a lower SIF investment was made to facilitate Phase 1 only (do something option); - Be at a higher SIF ask and not provide a strategic link road (lower quality) but could maximise land availability for development (alternative option). Additionality assumptions are stated and have been applied to the job and GVA estimates. They appear on the whole to be based on established research and recognised benchmarks. Their additionality calculations assume: - 40% leakage – at the City Region level reflective of Census 2011 Travel to Work data and modelling in respect of the Phase 1 scheme. This is just below the HCA’s ‘high’ leakage benchmark of 50% and is likely to reflect the spatial positioning of the project close to the boundary of Greater Manchester and Cheshire & Warrington sub-regions via Wigan and Warrington respectively. This assumption appears well considered and is deemed reasonable. - 20% displacement – outputs offset by reduced outputs elsewhere within the LCR are considered ‘low’ by the applicant on the basis that both the St Helens Employment Land Needs Study and an independent LCR level assessment of logistics requirements identified a large land requirement, towards which the Parkside site is listed as a key site. HCA Guidance benchmark for low displacement is 25%. However, the guidance also suggests displacement in respect of regeneration through physical infrastructure projects to be in the order of 38% at both the sub-regional and regional level – we would consider
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this to be a more reasonable position. - 0% deadweight – based on the ‘do nothing’ option, without SIF support the project will not be implemented for the foreseeable future owing to prohibitive upfront infrastructure costs which has been evidenced by the lack of market intervention since the colliery closed in 1993. This is a reasonable assumption. - Multiplier - A composite multiplier of 1.46 is applied which the applicant states is based on BEIS additionality guidance for capital physical infrastructure projects at the sub- regional level. This guidance is somewhat dated (2009) and we would reference the HCA’s Additionality Guide (2014) which suggests a sub-regional composite multiplier of 1.33 for interventions focused on regeneration through physical infrastructure. Applying these revised assumptions to our direct construction job estimate of 488 (49 FTE) reduces the gross to net job figure to 241 (24 FTE) jobs.
Value for money in relation to: o Efficiency – the rate at which the intervention converts inputs to GVA – expressed as a benefit cost ratio and Net Present Public Value (refer to Questions 13, 14, 15, 16 and 21 and additional information such as the results of webTAG and DCLG appraisals). The appraiser should test the sensitivity of the results to changes to key variables.
Assessment criteria: ratio of net additional GVA to net public sector cost. GVA will be estimated by the appraiser based on the data provided by the applicant. Net public sector cost per gross and net additional job.
Net Present Benefit Cost Below Above Public Value Ratio benchmarks benchmarks
Appraiser’s assessment £100,571,000 3.86 including including phase phase 2 and 3
2 and 3 of PRD of PRD PRD = Parkside £34,863,000 1.991:1 Regeneration excluding phase excluding phase Development 2 and 3 of PRD 2 and 3 of PRD
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Gross job Net public Below Above sector cost per benchmarks benchmarks gross job
Appraiser’s assessment Direct – 49 £611,000 Indirect – 6,022 £5,000
Net job Net public Below Above sector cost per benchmarks benchmarks net job
Appraiser’s assessment Direct – 24 £1.24m Indirect – 2,979 £10,000
Appraiser’s comment The value for money case is less strong than it was at OBC stage (when (including on national a BCR of 5.0 including development and 2.1 excluding development was level assessments and identified). the results of sensitivity Following a meeting on 2nd August 2018 it was agreed that the analyses) modelling work to support the business case was to be updated to bring it in line with WebTAG including clarification and revisions to the base model, forecasting and economic analysis. The current analysis with and without development is not the WebTAG compliant approach to analysing dependant development. This is also being updated following the meeting on the 2nd August 2018. The costs used within the economic analysis are from the May 2018 submission for the scheme. Overall the project cost has increased since that version of the submission (£35,087,786.28 compared with £33,651,879 in previous version). It is important to note that the costs are not yet finalised and target cost is not programmed to be developed until March 2019. The BCR and Net Present Value provided in the business case are therefore the latest available but not the final BCR. The assessment of cost per job is based on Cushman & Wakefield’s estimates of the 488 direct construction jobs (49 FTE equivalent) created to deliver the new link road and our additionality assumptions identified above. We have utilised the Regeneris’ economic output model issued to the CA at the SOC and OBC SIF appraisal stage to ensure consistency in approach. The figures indicate that the link road construction scheme represents very low value for money relative to the benchmarks in terms of cost per job (£611,000 gross to £1.24m net). This is not an unusual result for cost per job estimates based on construction employment and given their transient nature such a calculation is not usually made. Considering the indirect tenant jobs made possible as a result of the
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land acquisition and new link road across the whole scheme provides a much more positive position with a cost per job of £5,000 gross to £10,000 net – notably better than the benchmarks and indicative of good value for money on this basis. However, this reduces to £22,600 gross to £45,600 net when longer term jobs beyond 2020/21 are excluded (i.e. phase 1 only), falling outside (above) the recommended benchmarks. Whilst the scheme reveals good value for money in respect of the estimated tenant jobs it is important to note that there is no contractual commitment to deliver the floorspace, nor are employment generating occupiers guaranteed. As such these indicators are indirect and ‘at risk’. Even based on a commitment to deliver the first phase employment space (92,900 sq m) and resulting tenant jobs (1,327) the value for money falls outside of the benchmarks.
o Economy – the extent to which the intervention will ensure inputs are at a minimum cost commensurate with the required quality (refer to Question 22)
Assessment criteria: scored
0 1 2 3 4
Appraiser’s score
Appraiser’s comment The applicant states that the link road works will be procured through the public sector National SCAPE Framework allowing time and cost efficient procurement without the need to go to full tender. The Framework is understood to facilitate best value through an open book approach, cost certainty, partnership working and performance management in order to ensure outputs maintain quality at minimum cost. The costs associated with the land acquisition required to deliver the link road and wider scheme will be the responsibility of St Helens Council Estates Management Services. The team is evidenced to have extensive experience of strategic land acquisitions, having a property portfolio in excess of £200 million. Professional external advice has been sought from JLL and DVS to inform the valuation of the land (provided as evidence) and the acquisition process, helping to inform the negotiation process and minimise cost. The valuation reports have been provided and support the land acquisition costs stated within the FBC. Any subsequent land acquisitions are stated to be at market value in accordance with RICS Guidance but should avoid the need for a costly and lengthy CPO process.
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The approach to minimising costs is valid and alternative options to reduce the land acquisition costs have been considered and discounted including working with existing land owners as development partners and sole purchase by the JV and/or Council due to a lack of available funding sources.
Gain share/repayment of SIF o clear case (where applicable) that the investment is expected to result in the repayment of SIF funding (refer to Questions 40-42)
Assessment criteria: scored
0 1 2 3 4
Appraiser’s score
Appraiser’s comment As a SIF grant request, no direct return or repayment to the Combined Authority is proposed. The application states that the Council and its joint venture partner propose to contribute over 40% (40.2%) of anticipated costs and that this is the maximum contribution the parties can make (this excludes cost of land already purchased). This represents a notable increase on the 32% contribution identified at OBC stage. However, the ‘other’ public sector funding contribution of £6.17m against a total project cost of £39.8m equates to a notably lower contribution of 15.5%. The private sector contribution has almost doubled from £5m at OBC to £9.85 million at FBC. It is indicated, although not directly stated, that the scale of costs associated with the required new link road infrastructure is rendering the scheme as a whole commercially unviable, and as such alternative options, which we consider to include loans, have been discounted. The Prospectus does state that SIF will offer gap funding in circumstances where a recyclable loan does not close the viability gap. We would recommend that if the CA is minded to offer a SIF grant that the Funding Agreement should include provision for monitoring completion dates, expenditure profiles and output targets with provisions for grant clawback for underperformance should the road not be delivered as agreed.
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Hurdle criteria
Need/demand for project o that there is clear evidence of need or demand for the project (refer to Question 6)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The applicant has submitted the AECOM (2016) Parkside Logistics and Rail Freight Interchange Study which includes a market supply and demand assessment which demonstrates the demand for a logistics and rail freight interchange in this location, but on the basis that the project is supported by improved highway access to ensure commercial appeal. More specifically, to connect the scheme to the SRN and to connect sites both east and west of the motorway. Without such improvements, the market potential of the project is severely constrained thus evidencing the ‘need’ for the new road infrastructure. Reference is also made to the need to improve journey times and congestion at peak times around Winwick, Lowton and Junction 9 of the M62. It is argued that the new link road will reduce traffic constraints through the provision of an alternative route which will benefit employment opportunities and social improvements within the locality. Whilst not mentioned, improved business efficiency and productivity could also result from quicker journey times. The demand case is supported within the FBC application by references to the SuperPort Land Availability Market Assessment which identified a requirement for an additional 400 hectares of logistics land over the next 20 years to maximise the opportunities presented by SuperPort. Parkside can provide a significant (8%) contribution to this identified requirement. Letters of support from sector specialists Transworth Rail, Railfreight Solutions and DB (Cargo) UK Ltd reference the importance and benefits of the scheme, including the requirement for the new link road. However, none express an explicit interest or commitment to operate from or occupy the scheme at this stage.
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Rationale for public sector intervention o there is a clear rationale for why the project requires public sector support, based on a credible market failure (refer to Questions 7 and 8)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The rationale for the public sector to contribute to the link road costs is presented on the basis of overcoming financial cash- flow and traffic capacity constraints: - Financial viability/cash flow – The large and upfront nature of the costs associated with the delivery of the new rail and road infrastructure required to facilitate the project are considered too significant to be borne by the private sector alone, as evidenced by the supporting cash flow forecasting within the Parkside Logistics and Rail Freight Interchange Study which estimates that a break-even point would not be reached until at least 2044. As such public sector intervention and SIF will be required to overcome the financial viability gap and support implementation. This is stated to be evidenced by the historic stalling of the site’s delivery.
- Traffic capacity - The market and development potential of the site is currently constrained by its existing road access which is unsuited to a major distribution and employment hub in terms of route, capacity and surrounding uses. Overcoming these constraints via the provision of a new link road and access points will enable the full scale of development to come forward. Specifically, opening up the eastern site to employment generating development and the SRFI. The road will unlock capacity, helping to ease issues of congestion on the local road network and the viability of sustainable transport by improving reliability. The applicant provides some evidence as to the number of daily HGV road movements (120) on the M6 which could be saved by the Parkside scheme, but this is in reference to the implementation of the rail freight element so cannot be used as the rationale for the funding of the road alone.
The applicant references ‘market failures’ in the form of
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transport capacity and cost and illustrates how the new link road will help to overcome these constraints, but does not respond to market failures in a technical economic sense. However, the response can be considered to address the following market failures: - Negative externalities – At present, the significant cost of constructing the new link road relative to the cashflow of returns of the development it will enable results in no incentive for private capital/borrowed finance to be invested in its provision. As such, delivery of the new road cannot progress without public sector intervention. The Parkside Logistics and Rail Freight Interchange Study submitted evidences this position. - Positive externalities – in the form of increased road capacity, reduced congestion, private sector investment and in the longer term, employment are not taken into account by the market so do not stimulate investment. - Imperfect knowledge – The perceived risk of development for large multi-modal schemes has constrained delivery. SIF investment in a new link road will overcome these identified market failures and unlock wider development.
Options assessment o an appropriate range of alternative options has been considered, including a do nothing / do minimum option (refer to Question 13)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment As requested by the application three alternative and appropriate options have been considered alongside the proposed option for the Parkside project as follows: - Option 1 Do Nothing – No SIF investment and no delivery. Does not meet project objectives. - Option 2 Do Something – Lower project cost (£18.5m) and SIF ask (£11.1m). Access from A49 limits scale to first phase of development and with negative traffic implications. Does not meet project objectives. - Option 3 Proposed Project – SIF investment towards £39.8m project cost enabling full scheme and enhanced access. - Option 4 Alternative option – Alternative route to open up full scale of scheme but not interconnectivity between west
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and east sites plus greater SIF ask (£27.89m) towards higher £42m total project cost. The applicant’s consideration of each of the options in terms of the advantages and disadvantages is fair and valid. Prior to the consideration of the four alternative options required for assessment within the Business Case, six potential routes for the Link Road itself were identified and assessed. Details of each are provided as supporting evidence in a full Options Appraisal Report which includes an appraisal of each option alongside an engineering, economic, environmental and social assessment. The route proposed within the FBC (‘yellow route’) is identified as the preferred option. There is some disconnect between the options considered within the Option Appraisal Report and the Options within the FBC. Option 2 within the business case was not included within the Optional Appraisal Report. It has therefore not been assessed in the same way as the other options. However, this option does not enable the development of phase 2 or the SRFI and therefore does not deliver the project objectives. This is explained within the summary table in Q13 and supports the selection of the preferred option.
Wider benefits o that there is clear case that the project will deliver relevant activities and outputs that lead to wider benefits. (refer to Questions 17 and 18)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The Applicant makes reference to four key wider benefits of the new link road scheme including: - Transport benefits – An Economics Report is provided as supporting evidence which identifies benefits in the form of improved journey times and accident saving. However, these points are not picked up within the applicant’s response to this question. Concerns have been raised with the applicant regarding the overly optimistic use of a 20% assumption for Wider Economic Benefits within the Economics Report with Systra advising that it should be reduced to 10% and included only if further justification/evidence could be provided. The latest design input plan indicates that the approach to wider economic benefits will be reconsidered and
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assessed in line with WebTAG guideline descriptions. Subject to completion of this analysis in accordance with WebTAG this section will be considered satisfactory. - Socio-economic – the full development is stated to help overcome some of the barriers to labour market participation by providing employment opportunities which could help to tackle some of the deprivation and high unemployment rates issues facing the area. Further, supporting employment and career progression within growing logistics sector through skills development including potential linkages with new St Helens College Northern Logistics Academy is also identified. - Economic growth – support wider economic growth of the LCR via strategic linkages and new floorspace including unlocking the full potential of Liverpool2, SuperPort and Atlantic Gateway initiative. - Environmental – in the longer term the SRFI will facilitate a shift from road to rail freight resulting in benefits associated with air and noise effects. In respect of the link road itself, the TUBA assessment indicates a monetary benefit of £2.77m derived from vehicle operating efficiencies and travel distances. All of these wider benefits are deemed valid, although limited attempt has been made to quantify these. Further, the response places emphasis on latter development of the SRFI rather than the construction of the enabling link road itself for which SIF is requested. Other outputs identified and quantified elsewhere in the applicant’s response include 3.5km of new road and 1.5km of new cycleway both of which are based off engineering appraisal studies and assumed robust, together with the potential to generate an estimated £11.4m of Business Rate income to the Council in the longer term. Other potential wider benefits relating to the development could include reduced journey times and a resulting reduction in carbon emissions; enhanced pedestrian and cycle accessibility and enhanced investor confidence through the commercial floorspace.
sustainable development
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o that there is clear case that the project will contribute to the principles of sustainable development. (refer to Question 19)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The applicant has supplied a desk based Scoping Report for an Environmental Impact Assessment (EIA) (dated November 2017) in respect of the new link road. The completed EIA has not been provided but is stated to be summarised within the Environmental Statement (ES) submitted to St Helens in support of the planning application. Key environmental impacts are identified and mitigated against for the preferred scheme. An environmental assessment of each of the route options has been provided within the Option Appraisal Report submitted as supporting evidence. It indicates similarities in terms of the social and environmental impacts (noise, air, landscape, townscape, historic environment, biodiversity and water) under each of the route options owing to the proximity and similarity of each. There is a clear intention to adhere to the principles of sustainable development throughout both the design and construction phase in line with relevant guidance, legal requirements and best practice. It is proposed to deliver the project via CEEQUAL, a sustainability rating and award scheme for civil engineering, infrastructure, landscaping and public realm works. Air quality, noise environmental sub-impact worksheet assessments should have been undertaken at FBC stage. This section is satisfactory subject to the acceptable completion of the relevant sub environmental worksheets.
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Equality and diversity o that there is clear case that the project will contribute to equality and diversity. (refer to Question 20)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment In responding to this question the applicant provides a copy of St Helens Council Comprehensive Equality Policy (2014-18). The Policy recognises the Council’s legal obligations and seeks to eliminate discrimination; advance equality of opportunity and foster good relations between people in a diverse community. The Policy also applies to contractors commissioned to provide services on behalf of the Council and is therefore interpreted to cover contractors in respect of delivery of the new link road. The project to deliver a new link road is considered by the applicant to improve accessibility to employment opportunities for all regardless of gender, disability and character. Scheme design is stated to incorporate provision for those with mobility impairment, such as tactile paving and equipment at traffic signal controls.
Preferred option o based on the analysis of economic costs, benefits and risks, the proposed project represents the preferred option (refer to Question 13-24)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment As requested by the SIF application, a minimum of four options have been considered. Each of the options considered are deemed reasonable. For each option the applicant has reviewed the relative advantages and disadvantages; the implications for the scale of public sector and SIF support costs; the resulting outputs in terms of new road and cycleway, construction jobs and indirect floorspace and jobs. Wider quantitative and qualitative benefits have been considered and scored under each option, as has a series of key risks. It is unfortunate that not all of the options included within the
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FBC submission were assessed as part of the Option Appraisal Report. This gap in analysis undermines the coherent and comprehensive evidence base to support options development. However, a formal transport appraisal to support the value for money case has only been undertaken on the preferred option. The benefit and risk factors analysed by the applicant has not been exhaustive and we would expect this to be expanded upon and better evidenced at FBC stage. However, overall the evidence presented supports a clear case that the proposed project represents the preferred option.
Stakeholder support o that there is clear evidence that the project has stakeholder support (refer to Questions 9 and 10)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The beneficiaries of the project as identified by the applicant are considered as both short/medium term and long term. In the short term the main beneficiaries of SIF funds are identified as the team of consultants and contractors (and their employees) that will take the new link road through the process from design and planning to construction phase in terms of income and skills generation. The financial benefit to local landowners through the sale of their land is also identified, although it is not proposed that SIF funds are allocated to the land acquisition. In the longer term, the applicant identifies the new employment opportunities generated by new business space. However, it should be noted that this cannot be directly linked to the delivery of the new road in terms of outputs. Local communities benefiting from enhanced access and a reduction in traffic are also identified. Other beneficiaries not mentioned by the applicant could include the supply chain companies involved in the project build, or businesses benefiting from local spend during construction. St Helens MBC could also be considered a beneficiary from the creation of a new road asset. A Stakeholder Management and Engagement Plan has been provided outlining the strategy for communication. The main stakeholders are identified within the FBC as St
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Helens Council, Warrington Borough Council and Parkside Regeneration LLP who have either been directly involved in the preparation of the SIF application and wider scheme proposals or have been reported to have been engaged through progress meetings and informal consultation. Letters of support are provided from St Helens Council, the Joint Venture Parkside Regeneration LLP, St Helens Chamber and Highways England as evidence of stakeholder engagement and support. The scheme has been clearly identified within the Local Plan demonstrating internal approval from St Helens Council. However, as yet no explicit evidence of support from Warrington Borough Council, one of the FBC’s identified main stakeholders is provided. Further letters of support are provided from rail based logistics consultancy advisors, Transworth Rail and Railfreight Solutions plus rail freight operator DB (Cargo) Ltd. Whilst they demonstrate rail industry support for the integrated project on which the rationale for investment is predicated, they do not demonstrate a firm interest or demand in the end offer. The other main stakeholders are the three private land owners from whom acquisition of land is required to facilitate the new link road and later development. The applicant states that terms have been agreed and solicitors instructed to prepare contracts in respect of the two larger plots subject to obtaining planning and funding offer. Negotiations are continuing on the third. This would suggest the support of these stakeholders. At FBC stage we would expect to see details of these agreements. Wider stakeholder engagement is understood to have been undertaken to inform the preferred option and in addition to statutory consultees, public consultation to support the planning application was undertaken from June to September 2017 and received 292 attendees. A Public Consultation Report has been provided detailing the process and comments received. 12 out of 30 responses were in support of the preferred ‘yellow route’ and it is stated that where viable, issues raised will be mitigated against.
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Delivery structure o suitable alternative delivery options have been considered and the option selected is the most appropriate (refer to Questions 25 and 26)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment Two other alternative and appropriate delivery options are provided and considered on their relative advantages and disadvantages to demonstrate the selection of delivering the project through the National SCAPE Framework as the preferred approach. The alternatives considered are to seek a contractor via a competitive tender and for the applicant (St Helens Council) as Local Highways Authority to deliver the project themselves. Both are discounted on the basis of timescales and in the case of direct delivery, a lack of available skills and resources. The applicant identifies through the preferred SCAPE Framework approach Balfour Beatty has been selected to act as the appointed delivery partner. They will provide the Environmental and Transport Assessments required to support the planning application, lead on the design of the link road and the construction of the project. Other partner organisations not mentioned include property advice in respect of the land acquisition and marketing of the development. The LCR CA as grant provider could also be considered as a partner organisation.
Project costs o the application demonstrates that the project costs are based on robust estimates (refer to Questions 34-37)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment A Feasibility Cost Summary undertaken by appointed contractor Balfour Beatty has been provided by the applicant to demonstrate robust cost estimates in respect of the construction of the new link road. The accuracy of the quote has been signed off and verified by the Section 151 Officer. Initial review by SYSTRA of the costs provided indicate that the
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costs have been developed from previous schemes recorded under the SCAPE Procure process. These have been market tested, which is required under the SCAPE process, by at least 3 suppliers. While this is identified as providing confidence in the budget cost going forwards to the Target Cost developed following the detailed design phase, there is additional budget included for developing a detailed design, delivering supporting documents required to submit for planning permission, including Environmental Statement and associated surveys. It includes for public consultation and liaison with stakeholders. Therefore, it is clear that detailed design has not been undertaken and that these are not final or ‘tendered’ prices as would be expected at FBC stage. Preparation of the target cost is programmed for completion on 8th March 2019. The costs include a contingency derived from risk that has been identified and costed within team workshops. Risk equates to £7.6m which represents 19% of the scheme costs. The approach to calculating the level of risk is not one we have seen before and clarification has been sought. The costs include a reduction of £2.7m for scheme opportunity cost. It is unclear what this represents and again clarification has been sought. The cost profile indicates that £6.17m of funding is required in 2017/18 and 2018/19. Given that the Detailed Design is not due for completion until December 2018 and the Target Price is not anticipated until March 2019. Further clarification is required to ensure that the spend identified for these years is eligible for inclusion in the business case. Inflation over the construction period of the scheme has been calculated from the Building Cost Information Service (BCIS) of the Royal Institution of Chartered Surveyors (RICS) calculator tool. Compound inflation has not been correctly applied, this leads to an underestimation of the outturn scheme cost in the region of £30,000. An updated Land Valuation Advisory Report by JLL dated February 2018 and by DVS dated March 2018 has been provided as evidence of land acquisition costs across the project. The JLL Valuation report recognises the landowners expectation of a ‘substantial premium’ above current agricultural use land values at c,£9,000 per acre given strategic policy and planning context supporting higher value industrial uses at the site. Comparable industrial transactions in excess of £300,000 per acre are provided as evidence. As such the £80,000 value per acre agreed is considered justified.
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Cushman & Wakefield’s knowledge of nearby industrial comparables indicate industrial land values in the order of £250,000 per acre (22 acres at Ravenshead Road, St Helens), suggesting £80,000 per acre to be relatively good value but reflective of the current Green Belt designation and risk around infrastructure costs and planning. When purchasing fees and stamp duty land tax is taken into account, the £4.72m land acquisition costs stated within the application is evidenced by the JLL and DVS report based on revised site areas. Given that detailed design has not been undertaken and that these are not final or ‘tendered’ prices as would be expected at FBC stage this element of the business case is assessed as unsatisfactory.
Need for Investment Fund support o that there is clear evidence that the project requires support from the SIF for example due to a funding gap (refer to Questions 34, 35, 38 and 39)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The figures presented and supporting narrative indicates a clear funding gap to deliver the link road that is beyond the financial resources of the public sector alone and presents too significant a risk for the private sector. A number of alternative funding streams including Motorways of the Sea (Atlantis) and Highways England Growth and Housing Fund have been investigated but discounted owing to being oversubscribed or the Parkside project not fitting funding criteria.
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Availability of match funding o appropriate arrangements (if applicable) are in place to secure the required level of match funding (refer to Questions 38 and 43)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment A letter from St Helens Deputy Chief Executive and Section 151 Officer dated 9th February 2018 is provided stating that the scheme cost estimates are understood to be accurate and that the Council has the intention and means to deliver the scheme on the basis of its proposed funding contribution, thus evidencing its commitment to the public sector contribution. However, the £6.17 million contribution figure proposed is not explicitly specified. A copy of St Helens Council Statement of Accounts for the year 2016-2017 further evidences their financial capability position with net assets in the order of £93.26 million. It is indicated that the £23.79 million SIF grant request will directly lever £9.85 million of private sector investment reflecting the costs to deliver the Phase 1 element of the proposed link road. The private investment will be provided by Parkside Regeneration LLP, the 50/50 JV between St Helens Council and Langtree. No evidence of the security or commitment of this contribution, by letter or otherwise, is provided. The latest Annual Report and Financial Statements for Parkside Regeneration LLP have not been provided by the applicant but indicate a loss before tax of £400,000 and net assets of £4.4m mostly attributable to land as at 31st March 2017. Further, at c.£651,000, cash assets will be insufficient to cover the identified private sector contribution. Whilst the financial stability of St Helens Council has been demonstrated, that of Langtree or the JV has not. As such, evidence of the availability, security and commitment to the identified privates sector funding contribution is required by the JV as a condition of any approval for SIF funding and before this assessment can be deemed satisfactory.
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Management and delivery arrangements o appropriate expertise, capacity, capability and systems to deliver the intervention successfully (refer to Questions 27, 28, 46, 47 and 48)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment As the Local Highways Authority, St Helens Council seek to demonstrate their expertise and capabilities of delivering major road infrastructure projects through the several million pounds worth of traffic management, improvement and maintenance projects undertaken on its network every year. They also report to oversee a range of major highway works from private developers and statutory utility undertakers. Evidence of similar highway projects delivered to time and budget is provided including Blackbrook Bypass (£7.8m 2005-07), although none are of the value scale proposed by the Parkside Link Road (£33.65m). In respect of the required land acquisition, the Estate Management team manages a £200m property portfolio and is responsible for the delivery of major regeneration projects including strategic land and property acquisitions. Both the transport and property industry are heavily regulated in terms of both systems/processes and capability. The Council confirms that all undertakings will be in accordance with industry regulations and guidance, and its staff have the relevant qualifications including Chartered Engineers; Transport Planners; Chartered Town Planners and Chartered Surveyors to service the project. Additional specialist skills can be acquired through the Scape Framework if required. Turning to project management, the Council intends to establish a Project Board, supported by a Project Management Team, to deliver the project which will be accountable to St Helens Cabinet Members and the LCR Strategic Transport Governance. A clear management and delivery structure is evidenced via organisational charts including organisational and individual roles and responsibilities and named personnel. Balfour Beatty has been contracted through the SCAPE Framework to deliver planning, design and construction of the proposed scheme. Balfour Beatty is an established and well known infrastructure specialist and is stated as specialising in delivering large complex transport projects in partnership with the public sector. A number of examples of Government funded schemes of relevance to the Parkside Link Road are
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given, including the design and build of a 4.5km £22m A5758 Brooms Cross Link Road for Sefton Council. The track record of delivery would indicate that Balfour Beatty has the capabilities and expertise to deliver this project. Other external support will be provided via Ramboll UK as sub- consultant to Balfour Beatty providing additional design and technical support and JLL in respect of identifying the cost of land. Both are professional and established businesses with an evidenced track record in their specialist field. The VOA also provides valuation and surveying services to St Helens as a local authority.
o capability to meet the financial requirements and liabilities that flow from receipt of SIF support (refer to Questions 44 and 45)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment In support of the SIF application, St Helens Council has provided its 2016-2017 Statement of Accounts and a letter dated 17th February 2018 from its Deputy Chief Executive and Section 151 Officer confirming its intention to deliver the proposed funding contribution. The application states that the Council has a strong financial capability (supported by net assets in the order of £93.26 million as identified within supporting Annual Accounts) alongside sufficient cashflow and reserves to cover costs both ahead of grant receipt and cost overruns. As a Local Authority, the applicant’s financial standing is considered robust. The Council states that if anticipated costs are significantly exceeded it could seek additional financial contributions towards the costs of the link road from future developers. Whilst not mentioned by the applicant, the selected developer Balfour Beatty are also assumed to be financially robust. Their half year accounts to 29 June 2018 illustrate underlying profits of £66m and a valuation of investments of £1.2 billion. The financial standing of the private investor Parkside Regeneration LLP has not been evidenced and 2017 accounts could illustrate some concerns, but as 50% stakeholder in the JV, St Helens Council are assumed to underwrite this. Clarity of this point should be sought as a condition of any funding offer.
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o the risk register presents a realistic picture of the business and delivery risks to the project, risks are apportioned appropriately between the public and private sector and appropriate risk management arrangements are identified (refer to Questions 23, 33 and 52)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment A clear and comprehensive project and construction risk register has been provided. The register covers a broad range of project risks, from legal and process, through design, environmental and ecological, to programme and supply chain. The register also includes an extensive range of construction risks. The risk register presents a realistic overview of the potential risks but the process adopted is focused on cost. Likelihood of occurrence has been considered but only in respect of implication on cost, not for example of programme, meaning that a project critical risk may be hidden without a non- monetary assessment of impact. The approach to calculating the level of risk is not one we have seen before. Clarification has been sought on the approach. The project risk register also lacks consideration of risk management and potential mitigation measures which we would expect to be demonstrated at this stage. The applicant suggests the Risk Registers will be updated at pre-construction stage; an owner will be allocated to each identified risk and a mitigation plan will be developed which will evaluate the impact on programme and cost. Regular risk management meetings will be held. Four principal risks are identified with the preferred option in relation to land purchase, planning, stakeholders and cost. The apportionment of these risks is placed solely on the public sector (100%). Despite financial contributions from the private sector, the applicant does not consider them to incur any associated risk. At FBC stage we would anticipate more thought to be given to the key project risks, particularly with regard to risk apportionment and impact and mitigation measures beyond costs, together with the approach to on-going risk management. Our ‘satisfactory’ assessment of this question is on the basis that further detail will be provided when available.
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o the intervention is deliverable having regard to risks and dependencies and that there is clear evidence these can be addressed and/or managed (refer to Questions 11, 12 and 52)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment There are a number of constraints that are yet to be overcome but could impact upon the successful delivery of the proposed project. We would consider the key external influences and critical success factors to be land ownership, planning permission and security of funding. The applicant briefly considers planning permission (from both St Helens and Warrington Council then by the Secretary of State) and land ownership as the main dependent constraints within its FBC response. The proposal to mitigate and/or manage these risks is limited to alignment with national and local strategies alongside consultation and engagement with land owners, the relevant local authorities and other statutory stakeholders. CPO powers can be implemented if required. A more extensive Project Risk and Construction Risk Register has been prepared by Balfour Beatty and submitted to support the application. The register identifies and considers a large number of risks in terms of impact, probability and cost. Mitigation measures and risk owners are not identified within the Risk Register. The text indicates that a Risk Workshop will be held early in the pre-construction stage to allocate ownership to each identified risk and develop a mitigation plan which could include programme re-sequencing; use of programme float; increasing or substituting resources; alternative methods; or design, specification or material changes. The current submission does not indicate if this risk workshop has yet been undertaken. Given the advanced stage of the submission it is recommended that this workshop is undertaken as soon as possible to identify risk owners and develop mitigation plans. Whilst the outstanding risks associated with land ownership, planning and funding are potentially ‘show-stoppers’, the external nature of these constraints limit the ability for mitigation. We would usually expect these externalities to have been overcome at FBC stage and any approval for funding should be subject to planning and land acquisition. It is recommended that the adoption of a formal and documented Risk Register incorporating risk ownership and
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mitigation measures throughout the project to support pro- active project management and risk mitigation is implemented.
Compliance with necessary regulations and requirements, including
o State aid o Procurement o Planning (what is the status and timescale implications) o other consents
(refer to Question 29-32)
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment State Aid – The applicant considers the project to be State Aid compliant on the basis the land and new highway will be in the ownership of the Council/Local Highways Authority. A Legal Opinion dated April 2018 has been provided by Kings Chambers which states “the project is State Aid compliant for the reasons set out in the attached Legal Opinion” and refers to GBER Articles 1-6; 13-14 and 56 on which the Council relies upon. The applicant confirms acceptance of the condition to repay any SIF funds in the event that the EU determines the project to not be compliant with State Aid rules. We would recommend the CA commission its own legal State Aid opinion should it be minded to approve SIF funds. Procurement – Procurement of Balfour Beatty is understood to have been undertaken through the SCAPE Framework which is aligned with OJEU and public procurement requirements. St Helens has also provided a copy of its Procurement Policy. Given the stage of procurement it is considered that this will not delay the proposed programme. Planning – The draft St Helens Local Plan preferred option identifies the Parkside SRFI site and seeks to allocate it as employment land, although this strategy is yet to be formally adopted. A full planning application for the link road was submitted on 23rd March 2018 to both St Helens and Warrington Council. The application will then be referred to the Secretary of State for final Planning Determination, as the scheme is on land currently designated as Green Belt. Planning approval is understood to be anticipated in Q4 2018 but could represent a key risk in respect of programme should this slip further. The Phase 1 application was submitted in January 2018 indicating commitment to the wider scheme development. Ownership – The acquisition of the freehold ownership of the
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remaining land required to deliver the link road and wider scheme is on-going. Heads of Terms are stated to have been agreed with two of the three third party land owners. Negotiations continue on the third and CPO powers are available if required. Continued negotiations with the third land owner and the issue of a possessory title claim could further impact upon the identified costs and/or programme. Confirmation of ownership should be a condition of and SIF offer. Subject to the prompt acquisition of the required land parcels, granting of the appropriate planning consent, and funding approvals in 2018, the two-year timetable for delivery appears realistic but is not without notable risk. A Gantt Chart is provided to illustrate proposed timescales. The ‘satisfactory’ response to this section is subject to receipt of anticipated planning approval and completion of the land acquisitions.
Communication strategy o that there is a clear and appropriate communication strategy for the project (refer to Questions 49)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The applicant provides a Stakeholder Management and Engagement Plan which identifies the key stakeholders and sets out how they will be engaged throughout the project (from pre- planning to delivery) including the purpose, method, responsibility and frequency of communication. The plan is stated to be in accordance with St Helens Council Consultation Guidance. Identified stakeholders include statutory consultees; various departments within the local authorities; other public and private sector bodies; and local residents, businesses and interest groups. Stakeholders are categorised from ‘inform’ through to ‘consult’, ‘dialogue’ and ‘engage’ dependent upon their interests which informs the proposed communication approach. Methods of communication proposed include meetings, briefings, direct correspondence, media announcements, events and social media dependent upon purpose and audience. Responsibility for each engagement is made clear.
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The communication strategy and approach is considered clear and robust. The application also identifies responsibility for marketing the development sites on completion of the proposed link road. Land to the west of the M6 will be marketed by the Joint Venture and Langtree, land to the east by LCR LEP. It is recommended that marketing of the sites commences in advance of the link road completion and that professional property agencies are appointed to support site marketing. Engagement with inward investment agencies and local business enquiries should also be considered in order to maximise the profile and market opportunity of the site.
Timescales o the overall timescale for delivery of the project is realistic (refer to Questions 48, 49 50 and 51)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment A Gantt Chart has been provided by the applicant to illustrate the broader outline development plan timescales in line with the application. As a whole, this overall programme appears reasonable provided that the land acquisition, planning and procurement process is not delayed - this is likely to represent the greatest risk to programme which currently illustrates enabling works start on site in January 2019. If planning permission is not anticipated until December 2018, this could indicate a potential slippage. HV diversion by others and statutory utilities diversion orders, lead in and installation both start ahead of planning permission being granted in the latest version of the programme. We would suggest that a construction period in the region of 12 months appears reasonable for a project of this scale and nature. The programme in April 2018 indicated a construction period of 308 days. This has increased to 348 days in the latest version of the project plan.
The SIF prospectus set out a requirement to start spending within 12 months and complete within 36 months of SIF prospectus (Sept 2016). Project completion is anticipated in February 2021, but SIF spend by March 2020. This is beyond the requirement of the SIF prospectus (Sept 2019), however the CA
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Unsatisfactory Satisfactory has recognised that large, complex and transformational projects will have more intrinsic risk and are unlikely to meet the initially proposed timescales.
Benefit maximisation o that there are clear and appropriate benefit maximisation arrangements proposed (refer to Question 53)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The applicant states that under the Scape Framework Balfour Beatty are required to meet a series of KPI’s linked to local spend and employment including 75% of spend and labour within 40 miles and 85% of subcontractor engagement with SMEs. It is recommended that these measures are quantified and monitored where possible through the on-going monitoring and evaluation process. These benefits could be implemented and maximised through engagement with St Helens Council and other organisations such as Liverpool in Work. The design of the link road is intended to contribute to benefit maximisation through supporting use by all users including cyclists., pedestrians and vehicles; enhance journey times for all and relieve local congestion hotspots.
30 Page 254
Monitoring and evaluation o the proposed monitoring and evaluation arrangements are appropriate to the scale and complexity of the project (refer to Questions 54-56)
Assessment criteria: satisfactory/unsatisfactory evidence
Unsatisfactory Satisfactory
Appraiser’s assessment
Appraiser’s comment The applicant identifies the key quantitative benefits and criteria that will determine the success of the project as: - Delivery to time, budget and specification; - Reduction of traffic at specified points; - Improved journey time reliability against traffic models; - S106 receipts; - Attracting economic development; and - Localised improvements in air quality. Monitoring and evaluation against these criteria will be undertaken by the Council through project/contract review procedures which will include traffic counts, monitoring of floorspace development and employment activity to ensure outputs are delivered and future lessons learnt. Monitoring throughout the pre-construction and construction phase will be led by Balfour Beatty and is stated to include regular monthly progress reports with the Council to report against an agreed Delivery and Design Schedule. During construction phase a detailed Project Programme will act as a live pro-active management tool to review progress against objectives. On completion, the new Parkside Link Road will become part of the adopted highway by St Helens and Warrington Council. Clearly the delivery of the link road to time, budget and specification will represent a single point of monitoring and evaluation. However, it is recommended that a time period and frequency over which to monitor the broader benefits is identified and agreed as a requirement of SIF. Overall, a series of sensible and relevant monitoring outputs are identified however the approach, frequency and responsibility for monitoring and evaluation could be better refined.
31 Page 255
Appraisers overall judgement to be based on a composite of the above criteria
In addition, applicants will be required to supply suitable financial information and be subject to a financial vet
Appraiser’s overall recommendations and comments
Based on the information provided to date, the application for £23.79 million of SIF grant to support the delivery of a new link road at the Parkside site in St Helens can be summarised and concluded as follows: . Strategic Case – The strategic case is strong, demonstrating good strategic fit with the LCR Growth Strategy, the SIF Prospectus and a number of wider local and national strategies for both transport and economic growth. There appears to be multiple stakeholder support for the project evidenced by letters of support from key stakeholders and potential end-users. This is an identified priority investment for the applicant (St Helens Council) with the principles established within the emerging Local Plan. There is a clear and evidenced ‘need’ and ‘demand’ for the project and public sector intervention – without which the scheme would not be deliverable for the foreseeable future owing to prohibitive cost and risk to the public and/or private sector alone; or would be of a demonstratively smaller scale that would limit the employment and economic potential of the site. The market demand for such sites and premises has been evidenced in supporting assessments, but is dependent upon good strategic road accessibility – which the proposed Parkside Link Road is seeking SIF to deliver. As such, public sector intervention will address identified market failures in respect of financial viability and traffic capacity. . Economic Case – Following consideration of a number of sensible ‘options’ the economic case for the preferred option for investment is currently being updated. The latest version of the Economics Report provides a BCR of 3.86 with development and 1.991 without development. These figures will change as the supporting modelling and economic analysis is updated to bring it in line with WebTAG. As anticipated, the current value cost per job is very low (£611k gross to £1.24m net) owing to the fact that the direct jobs delivered through the delivery of the link road are in construction and therefore temporary in nature. However, a number of significant wider quantitative and qualitative impacts are identified in respect of transport, socio-economics and economic growth and environmental benefits, particularly as a result of the later development of the full Parkside scheme which will be enabled as a result of the new link road. For example, when indirect tenant jobs are taken into account, the scheme offers very good value for money in the long-term (£5-10k gross to net per job). Albeit, there is no contractual commitment to deliver any of this new floorspace, nor are employment generating occupiers guaranteed. The project respects the principles of sustainable development and takes into account equality. . Commercial Case – The commercial case is much less robust and represents the greatest risk to delivery and programme. Not all of the land is in Council ownership and the scheme does not yet have detailed planning consent. The contractor has however been selected though an appropriate tendering framework and the processes to ensure that costs are at a minimum consummate to the required quality are appropriate. The scheme is understood to be State Aid compliant but we would recommend the CA
32 Page 256
undertake its own legal opinion. . Financial Case – The financial case raises another area of concern in respect of this application. The Detailed Design is not programmed for completion until December 2018 and the Target cost will not be available until March 2019. The costs presented therefore are not final and will be subject to change as the scheme continues to be worked into detailed design and risk items within the case are realised and addressed. Clarification is required on spend items incurred in 2017/18 and which are programmed for 2018/19 to ensure these are an eligible part of the application. It is noted that the entire SIF ask is programmed for 2019/20, whilst this is reflective of the construction timescale, there are concerns that given the level of risk still within the programme it could potentially cause issues with SIF programming if the timescales were to slip. The scale of private sector investment is relatively small but represents the costs of delivering the first phase of road infrastructure. Of greater concern is the lack of evidence in respect of the security and commitment of the private sector contribution from Parkside Regeneration LLP. The financial standing of the Council is considered robust and their ability and commitment to meet any cost over-runs is confirmed. As a grant request, no repayment of SIF will be made. . Management Case – Both St Helens Council as applicant and Balfour Beatty have appropriate experience and capacity to deliver the link road project as proposed. A clear organisational structure with roles and responsibilities has been provided. The risk register needs to further consider mitigation measures. The project programme is currently deliverable but susceptible to considerable risk of slippage in respect of planning and land ownership risks. The project should be able to meet the requirements of the SIF Prospectus with regard to the programme of project spend but is not without risk. Monitoring and evaluation procedures are established but should be agreed as a condition of SIF. In this sense, the management case is considered to be met. The main concern will be in respect of programme and it is recommended that any SIF offer is time conditioned in terms of both implementation and completion.
To conclude, the Parkside link road project represents a rare opportunity to enable development and open up a strategic development site in an attractive market location with the (indirect) potential to create significant new floorspace, jobs, economic growth, attract investment, generate value and enhance movement on a regeneration site that has long been recognised as a strategic priority at the regional level. As such, the strategic case for investment is strong and an established and experience team is in place to deliver the project. However, risks remain to both delivery and programme, particularly in relation to planning permission, land acquisition, and the finalisation of costs following detailed design and economic assessment (now programmed for March 2019). We would expect each of these key risks to have been determined at FBC stage, supported by a WebTag compliant assessment of the proposed option for investment to evidence anticipated outputs. These tasks have not been completed, nor are they anticipated until March 2019 – at which point they may require further refinement following review risking further delay. As such, the FBC is considered in need of further development work and therefore, as assessors, at this point in time we are not currently in a position to be able to recommend approval of the requested SIF funds for this project. However, should the Combined Authority be minded to approve the SIF grant requested for the
33 Page 257
new Parkside Link Road, it should as a minimum, be on condition of the following: . A WebTag compliant assessment of the proposed scheme demonstrating a robustly evidenced acceptable BCR illustrating the benefits of the project . Detailed design and evidence of final costs including potential for a reduced SIF offer should identified costs decrease. The applicant should remain responsible for any costs increases or over-runs. . Review of stated 2018/19 spend as incurred spend will not be eligible under SIF assessment . Completion of land acquisition of all required parcels . Planning permission for the proposed link road (St Helens and Warrington Councils and Secretary of State) . Confirmation and security of identified private sector match funding (Parkside Regeneration LLP) . Agreed timescales for SIF drawdown linked to project implementation and completion target dates. Given risks to programme, this should include a mechanism for clawback should targets not be met
34 Page 258 Agenda Item 13
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: Liverpool
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF COMMERCIAL DEVELOPMENT AND INVESTMENT
LIVERPOOL CITY REGION SINGLE INVESTMENT FUND SKILLS CAPITAL, WOMEN`S TECHNOLOGY TRAINING LTD (ENTERPRISING FUTURES 2)
FULL BUSINESS CASE DECISIONS
1. PURPOSE OF REPORT
The purpose of this report is to seek Combined Authority decision on Skills Capital Enterprising Futures 2 project change.
2. RECOMMENDATIONS
It is recommended that the Liverpool City Region Combined Authority:
(a) Note the recommendations of the external appraiser’s report; and
(b) Approve the allocation of the full grant to one site only and remove the new training floor space output from the post project monitoring and evaluation plan.
3. BACKGROUND
3.1 The Combined Authority approved Skills Capital SIF funding for Enterprising Futures 2 project on 18 August 2017.
3.2 The project was across two sites (Blackburne House and Faulkner St buildings); however, the second site (Faulkner St) has faced a number of issues in terms of its lease and financial support from a third party.
3.3 Therefore, the applicant has requested that the ring-fenced grant allocation be assigned in its totality to the Blackburne House site only.
Page 259 3.4 The learner outputs in the grant funding agreement are unchanged; however, the output for the new floor space will not be achieved.
3.5 The independent appraiser recommends that the project should continue it is still “good value for money”.
3.6 The report is seeking a further approval as the reduction in floor space is deemed a “material change” and the original report stated that any changes would be brought back for consideration to the CA.
4. RESOURCE IMPLICATIONS
4.1. Financial
4.1.1 There is no additional funding required, the project will be delivered to the approved £1,997,976.
4.1.2 The Combined Authority will monitor the project within the agreed funding envelope.
4.2. Human Resources
There are no human resource implications to this report.
4.3. Physical Assets
There are no physical asset implications of this project for the Combined Authority.
4.4. Information Technology
4.5 There are no Information Technology implications to this report.
5. RISKS AND MITIGATION
The risk is low as the contractor is on-site and the Combined Authority monitor the project and its associated risks on a monthly basis.
6. EQUALITY AND DIVERSITY IMPLICATIONS
There are no equality and diversity implications to this report.
7. COMMUNICATION ISSUES
The decision will be communicated to the applicant and the grant funding agreement updated accordingly.
Page 260 8. CONCLUSION
This report outlines to the Combined Authority the applicants request and its implications which are deemed negligible.
MARK BOUSFIELD Director of Commercial Development and Investment
Contact Officer(s): Dan McCafferty, Corporate PMO Head of Service (0151 330 4513)
Appendices: Appendix One – External Appraisers report
Background Documents: Combined Authority report dated 18 August 2017.
Page 261 This page is intentionally left blank Enterprising Futures 2, SIF 102
Executive Summary:
Women’s Technology Training Limited (WTECH) has been awarded £1,961,976 by Liverpool City Region Combined Authority (LCRCA) to deliver the Enterprising Futures 2 project. The project was originally based on completing work on two properties, but one of those properties is no longer available. The applicant is requesting that the Authority approve a change request which would enable them to retain the overall allocation of £1,961,976 but spend it purely on Blackburne House.
The Authority has commissioned add specialists to assess this change request as they completed the appraisal of the original Full Business Case (FBC). This paper sets out add specialists’ assessment, and the headline recommendations are that the Authority: i) Recognises that the project still represents strong value for money as set out in the revised Benefit Cost Ration (BCR) appraisal in Section 4. ii) Approves the change request to allow WTECH to spend the grant solely on the property that they own, Blackburne House. iii) Agrees that the original grant approval of £1,961,976 can be maintained. iv) Amends the existing Funding Agreement to remove the output relating to 743.22 m2 of new training floor space area.
Section 1: Background:
In August 2017 Liverpool City Region Combined Authority (LCRCA) awarded £1,961,976 to Women’s Technology Training Limited (WTECH). The funding was awarded through the Single Investment Fund (SIF) following the independent appraisal of WTECH’s Full Business Case (FBC). The appraisal was completed by Peter Ide of add specialists limited.
WTECH sought funding for work to 2 properties:
. Blackburne House – refurbishment work on this Grade 2 listed building to create a digital and creative training facility. This work would lead to refurbished training facilities totalling 4,730 m2.
. Falkner Street – an extension into the leased ground floor of this residential development would extend the training facility and deliver refurbished training facilities totalling 743 m2.
The applicant initially requested £1,997,976 but during the appraisal process £36,000 of match-funding was identified and the request to LCRCA was reduced to £1,961,976. In the FBC the amount of funding earmarked for Falkner Street was £425,093 but the applicant has since highlighted that this was an error and the correct figure is £227,246
Unfortunately, there have been delays in securing Falkner Street and the applicant has now had to focus instead on Blackburne House. The applicant has submitted a change request to LCRCA.
1 | P a g e Enterprising Futures 2 (SIF102) PageValue 263 for Money appraisal LCRCA has commissioned add specialists limited to review the change request and:
. assess whether the new financial and output forecasts appear deliverable and realistic
. re-appraise the project’s Value for Money (VfM) case including re-calculating the Benefit Cost Ratio (BCR).
Section 2: Original project scope and metrics:
In August 2017 Liverpool City Region Combined Authority (LCRCA) awarded £1,961,976 to Women’s Technology Training Limited (WTECH). The funding was awarded through the Single Investment Fund (SIF) following the independent appraisal of WTECH’s Full Business
The funding award was based on the following summary cost table:
Cost heading Cost Design £92,361 Construction £1,198,375 Industry Standard Training Resources £425,093 Contingency £20,000 Construction VAT £262,147 Total capital spend £1,997,976 Match funding £36,000 SIF request £1,961,976
A detailed breakdown of each cost heading was provided by the application. The GFA set out the costs as follows:
2017/18 2018/19 2019/20 TOTAL Capital grant £1,116,690 £845,286 £1,961,976
Costs Eligible Blackburne Falkner Street expenditure House IT and learning environment £425,093 £197,847 £227,246 resources Environmental efficiencies, £1,536,883 adaptations and upgrades TOTAL £1,961,976
Whilst the GFA did not include a breakdown of costs between the 2 sites, the applicant has since informed LCRCA that £227,246 of the £1,961,976 (11.6%) relates to Falkner Street. This £227,246 sits in the cost heading ‘IT and learning environment resources’ with a total value of £425,093 as shown in the table above.
The applicant agreed to deliver the following outputs:
Output measure Output figure Refurbished area of training floor space (m2): 3,987 New area of training floor space (m2): 743.22 Direct jobs created: 20.5 Indirect jobs created: 338
2 | P a g e Enterprising Futures 2 (SIF102) Page 264Value for Money appraisal Number of new learners assisted: 511 Apprenticeship positions assisted: 159 Traineeship positions created: 39 Number of BAME enrolments supported: 1,485 Number of new learners assisted that gain employment: 319
In the original application the outputs were split 80% to Blackburne House and 20% to Falkner Street as shown in the table below:
Blackburne Output measure Falkner Street TOTAL House Refurbished area of training floor space: 3,987 3,987 New area of training floor space: 743.22 743.22 Direct jobs created: 16.5 4 20.5 Indirect jobs created: 271 118 338 Number of new learners assisted 408 103 511 Apprenticeship positions created: 127 32 159 Traineeship positions created: 31 8 39 Number of BAME individuals (enrolments) 1188 297 1,485 supported Number of new learners assisted that gain 255 64 319 employment
The Value for Money (VfM) appraisal of the original FBC is summarised below:
Net Present Public (NPV) Benefit Cost Ratio (BCR) Benchmarks
£83,795,751 39.44 1:15 Gross jobs and learners Gross cost per job & learner assisted into employment £2,006 1,125 (based on adjusted SIF request to allow for £4,650 optimism bias) Net jobs and learners Net cost per job & learner assisted into employment £3,078 733 (based on adjusted SIF request to allow for £7,950 optimism bias)
The NPV value was calculated by deducting the present value of costs from the present value of Gross Value Added (GVA). The GVA forecasts included the financial value of direct job creation; people assisted into employment; and improved productivity.
The figure of 1,125 gross jobs and learners into employment was made up as follows:
. 95 jobs created by founders of social enterprises assisted by the applicant. Half of these enterprises were forecast to be created and led by women.
. 1,030 learners assisted into employment. This was based on the applicant enabling all of the individuals that completed the following courses to access employment: Basic Skills; Development learning - underpinning skills; and, Apprenticeships level 2.
3 | P a g e Enterprising Futures 2 (SIF102) PageValue 265 for Money appraisal
The table below shows the profile of the skills outputs contained in the Grant Funding Agreement (GFA):
These figures were used to calculate the improved productivity that fed into the NPV calculation. Please note that the contracted outputs target were lower than the figures used in the calculation of the Benefit Cost Ratio (BCR) to allow for optimism bias.
Section 3: Revised project scope and metrics:
As highlighted earlier, the applicant WTECH cannot now secure Falkner Street in the requisite timescales. As highlighted earlier, £227,246 of the £1,961,976 awarded for the project was earmarked for Falkner Street. The budget for ‘capital grant for IT and learning environment resources’ for Blackburne House and Falkner Street was £425,093.
The applicant requests that the funding earmarked for Falkner Street is now spent on Blackburne House. The table below provides the detailed costs on which the total budget of £425,093 for IT and learning environment resources would be spent.
Costs Quantity Item Cost Total Cost
Mid Tower Gaming PCs-i5 16Gb, GTX graphics 15 £1,800 £27,000 Adapter, windows 10pro with monitor and software Standard Desk top and software: ACER Aspire 25 £600 £15,000 Laptops: LENOVO idealpad/tablets 100 £600 £60,000 Gaming Design development kits:: Playstation 4 10 £2,500 £25,000 Virtual reality Games Headsets 15 £400 £6,000 Printers: HP Laser 3 £400 £1,200 3D Printers 3 £2,800 £8,400 Audio Visual aids-Projectors and Screens and TV 20 £1,800 £36,000 screens 8 £1,800 £14,400 Smart Boards and fixed and mobile dry white boards 15 £100 £1,500 Installation of new hardware and cabling to aid connectivity via 3G & 4G plus electrical requirements 1 £70,000 £70,000 and builders works. Classroom resources: revised higher furniture spec tables/desks to enable a flexible learning environment 1000 Various £160,593 with associated works Total cost £425,093
4 | P a g e Enterprising Futures 2 (SIF102) Page 266Value for Money appraisal
The costs in the table above can be categorised as enabling: higher specification IT equipment; and, additional IT infrastructure and connectivity. The revised profile would therefore be as follows:
2017/18 2018/19 TOTAL Capital grant for Environmental efficiencies, adaptations and £1,116,690 £420,193 £1,536,883 upgrades Capital grant for IT and learning £425,093 £425,093 environment resources GRAND TOTAL £1,116,690 £845,286 £1,961,976
With regards to outputs, the applicant proposes to achieve all of the targets in the GFA purely from Blackburne House. They do intend to secure an additional building which will be focussed on construction training but support from the Single Investment Fund (SIF) is not sought for this. The applicant has delivered the following outputs to date (DNYA stands for Data Not Yet Available):
Delivered to Output measure Total target date (% of target) Refurbished area of training floor space (Blackburne House): 3,987 3,193 (80%) New area of training floor space (Falkner Street): 743.22 0 Direct jobs created: 20.5 100% Indirect jobs created: 338 DNYA Number of new learners assisted: 511 321 (62%) Apprenticeship positions created: 159 DNYA Traineeship positions created: 39 53 (136%) Number of BAME individuals (enrolments) supported 1,485 456 (30.7%)
Number of new learners assisted that gain employment 319 DNYA
The profile of learners has been adjusted as indicated in the table below.
5 | P a g e Enterprising Futures 2 (SIF102) PageValue 267 for Money appraisal Section 4: Revised Value for Money calculation:
The revised funding profile has been entered into the BCR template. The following figures were used to calculate GVA:
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Measure Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 SIF request £1,116,690 £845,286 Jobs created 6 10 14 18 22 25 People assisted into 165 169 174 174 174 174 employment Improved productivity £0 £7,404,277 £9,350,746 £10,907,434 £11,453,438 £7,788,906
The table below summarises the Value for Money (VfM) metrics. The figures from the original BCR are shown in brackets.
£1,961,976 SIF request: (£1,961,976) Net Present Public (NPV) Benefit Cost Ratio (BCR) Benchmarks £81,140,329 37.49 1:15 (£83,795,751) (39.44) Gross jobs and learners Gross cost per job & learner assisted into employment 1,125 £2,006 £4,650 (1,125) (£2,006) Net jobs and learners Net cost per job & learner assisted into employment 733 £3,078 £7,950 (733) (£3,078)
Whilst the Net Present Value and Benefit Cost Ratio have fallen slightly, all other measures have stayed the same as the original appraisal. The fall in NPV and the BCR is a function of a drop in the GVA generated by the learners as the projections of the number of certain courses have fallen. However, the project still represents excellent value and can be recommended for approval.
The appraisal ran the following revised numbers through BCR analysis, to explore a scenario whereby the applicant only delivers the outputs originally attributed to Blackburne House. This seems prudent as the Combined Authority has no influence over the additional space that the applicant wishes to secure. In this scenario the outputs have been reduced to 80% of the total forecast.
2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Measure Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 SIF request £1,116,690 £845,286 Jobs created 5 8 11 14 18 20 People assisted into 132 135 139 139 139 139 employment Improved productivity £0 £5,923,421 £7,480,597 £8,725,947 £9,162,751 £6,231,125
The table on the following page summarises the Value for Money (VfM) metrics based on this scenario. The figures from the original BCR are again shown in brackets.
6 | P a g e Enterprising Futures 2 (SIF102) Page 268Value for Money appraisal £1,961,976 SIF request: (£1,961,976) Net Present Public (NPV) Benefit Cost Ratio (BCR) Benchmarks £64,396,458 29.96 1:15 (£83,795,751) (39.44) Gross jobs and learners Gross cost per job & learner assisted into employment 899 £2,509.76 £4,650 (1,125) (£2,006) Net jobs and learners Net cost per job & learner assisted into employment 586 £3,851.55 £7,950 (733) (£3,078)
As can be seen, the NPV and BCR are both lower than the original project in this scenario but they still represent excellent value. The gross and net cost per job and learner combined are both lower than benchmarks despite the slight rise compared to the original project. This analysis of the worst-case scenario provides confidence that the project will still represent good value if the applicant can only deliver the proportion of outputs originally earmarked to Blackburne House.
It should be noted that the project cannot deliver the output of 743.22 m2 relating to ‘new area of training floor space’ as the Falkner Street site is not going ahead.
Section 5: Deliverability:
It is important to assess the deliverability of the project’s output forecasts given the significant change that has occurred. As highlighted earlier, Blackburne House was forecast to deliver 80% of the outputs originally, and will now deliver 100% of the forecast outputs.
The appraisal team have tested the applicant’s ability to deliver the increased allocation within Blackburne House. The applicant highlights that they are maximising the refurbished floorspace at Blackburne House and are requesting the reallocation of the SIF funds for the higher specification IT to aid them in reaching our procured allocation and predicted outputs.
If the applicant does secure an additional building which will be focussed on construction training this will be used to help deliver the original outputs attributed to Falkner Street, but as stated earlier, no funding from the Single Investment Fund (SIF) is sought for this additional building. The applicant highlights that they hope to have secured the additional building in September 2018 and they will record outputs via their ILR returns. They have stated in writing that no double-counting of outputs will occur and stress that Blackburne House can deliver 100% of the outputs in the event that the additional building is not secured.
Section 5: Recommendation:
As detailed throughout this report, the project still represents strong value for money even if the applicant is only able to deliver 80% of the outputs that they are currently contracted to achieve. The applicant stresses that in reality, they will deliver all outputs in the Framework
7 | P a g e Enterprising Futures 2 (SIF102) PageValue 269 for Money appraisal Agreement with the exception of the output relating to 743.22 m2 of new training floor space area.
The appraiser makes the following recommendations: i) The Authority approves the change request to allow WTECH to spend the grant solely on the property that they own, Blackburne House. ii) The Authority agrees that the original grant approval of £1,961,976 can be maintained. iii) The Authority amends the existing Funding Agreement to remove the output relating to 743.22 m2 of new training floor space area.
8 | P a g e Enterprising Futures 2 (SIF102) Page 270Value for Money appraisal Agenda Item 14
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All Authorities
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF POLICY AND STRATEGIC COMMISSIONING
PRIORITISING BROWNFIELD HOUSING SITES
1. PURPOSE OF REPORT
1.1 This report sets out the Liverpool City Region Combined Authority’s (LCRCA) approach to prioritising the development of Brownfield housing sites in the context of the LCRCA Brownfield Land Register and ongoing work with Homes England. However to address the development potential for these brownfield sites it is necessary to identify the resource implications required to deliver housing units on these sites.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority:
(a) To endorse the LCR approach of prioritising the development of brownfield housing sites;
(b) To support the LCRCA approach to secure funding for the development of Brownfield sites.
3. BACKGROUND
3.1 The LCR Metro Mayor’s manifesto set out his policy of better use of brownfield land. The LCRCA will focus its financial and policy powers to deliver brownfield sites for development, especially for housing.
3.2 The LCRCA has published a City Region wide Brownfield Land Register in February 2018 promoting a Brownfield First agenda. The link is below:-
http://liverpoolcityregion- ca.gov.uk/uploadedfiles/documents/LCRCA_Brownfield_Reg_230218.xlsx
Page 271
3.3 Brownfield Land Registers provide up-to-date and consistent information on sites that the 6 constituent local authorities consider to be appropriate for residential development and are deliverable within 15 years of being placed on the Register. The LCR Brownfield Register identifies 383 sites across the LCR, which equates to 494.96 ha of brownfield land and could provide a minimum of 22,249 dwellings. A breakdown of this on a local authority basis is set out below:-
Local Authority Number of Sites Hectares Minimum number of Dwellings
Halton 28 40.68 869 Knowsley 42 35.71 911 Liverpool 89 75.19 8431 Sefton 43 85.29 2594 St.Helens 98 212.11 5818 Wirral 83 45.98 3626
Total 383 494.96 22,249
3.4 It should be noted that the LCR Brownfield Land Register is not a comprehensive list of all brownfield sites within the LCR, it does not include employment sites or those sites which have such significant constraints that they will not be developed within the next 15 years. However as a starting point for delivery and viability funding it is considered an appropriate place to start.
3.5 There have been a number of reports produced establishing costs per hectare for brownfield remediation. These by the very nature of the diversity and complexity of brownfield contamination are a guidance. Examples of such reports are:-
CLG Report (2011) – this estimates that on average the cost of remediating brownfield land is £250,000 per ha.
HBF Report (2013) - this estimates that on average the cost of remediating brownfield land is between £175,000 and £325,000 per ha.
HCA Report “Guidance on Dereliction, Demolition and Remetiation Costs” (2015) – this is a significantly more detailed report and sets out a wider range of costs dependent on previous land use, proposed land use etc. The average range of costs for brownfield land reclamation for family residential use is between £75,000 and £1,765,000 per ha.
3.6 As can be seen there is a huge variation of cost estimates, and the HCA (now Homes England) report is more comprehensive. These reports are also dated and there is likely to have been an increase in costs since these reports were prepared. These costings therefore have to be treated as very approximate.
Page 272 3.7 As can be seen from the costs set out in the above reports it is not viable to develop many of the Brownfield Land Register sites due to the viability gap resulting from the cost of remediation. As such the LCRCA needs to assess more accurate remediation costs and available funding sources.
3.8 To provide a more detailed cost for the remediation of brownfield sites within the LCR, the Combined Authority has commissioned Keppie Massie to complete a Brownfield Housing Site Viability Study. This is reviewing all sites with a potential capacity of 80+ dwellings listed in the LCR Brownfield Register plus those sites which were submitted as part of the LCR Housing Infrastructure Fund (HIF) Bid (namely – Routledge site (Halton); Halsnead (Knowsley); International Garden Festival site (Liverpool); Land East of Maghull (Sefton); Moss Nook (St.Helens) and: Wirral waters (Wirral)).
3.9 This will provide a more accurate strategic cost of land remediation of these sites. The Keppie Massie study is due to be submitted to the LCRCA in the next month. The outputs of the study can then be used to negotiate potential funding streams.
3.10 The LCRCA has held positive discussions with both Homes England and the Ministry of Housing, Communities and Local Government regarding potential funding for brownfield remediation – and that is in part why the Keppie Massie Study has been commissioned – however securing that level of funding from them has significant challenges.
3.11 In addition to the remediation and development of these sites
4. RESOURCE IMPLICATIONS
4.1 Financial
The LCRCA has previously bid for funding from the national HIF funding stream, however this was unsuccessful. Potential alternative funding sources are:
Homes England funding – this would be based on future negotiations with Homes England to secure a bespoke funding package to bring some of the LCR brownfield sites forward and would be focused on housing delivery.
LCR Single Investment Fund funding – the previous SIF call for Housing identified two sites for potential funding (Halsnead and Moss Nook) there is potential for a future SIF funding stream. However this funding would be limited and would need to be directed to those sites where housing delivery would be secured and could be delivered at pace.
Future Potential Housing Deal – any discussions that the LCRCA have regarding a future potential Housing Deal would identify this.
Local Authority Funding – all constituent Local Authorities have had significant funding cuts under the national government’s austerity plan and as a result available funding from this source is minimal.
Page 273 Pension Fund – any funding secured from Pension Funds would need to secure repayments and a return for the pension fund. The potential for Pension Funds to provide funding for remediation which they would secure a financial return from is considered to be minimal.
Collaborative work with the LCR Housing Associations – aligning Housing Association resources and funding steams to the delivery of brownfield sites
4.2 Human Resources
There are no direct Human Resources implications resulting from this report.
4.3 Physical Assets
A total of 30 sites in the LCR Brownfield Land Register are owned by public authorities including constituent local authorities.
4.4 Information Technology
There are no direct Information Technology implications resulting from this report.
5. RISKS AND MITIGATION
5.1 The risk of not actively prioritising Brownfield Housing sites is that housing development may focus on easier to deliver greenfield and potentially green belt sites. The majority of brownfield sites are located in sustainable locations within existing communities and therefore prioritising these sites will assist in regenerating sustainable sites within existing communities. If this approach is not promoted there is potential for communities to become further disenfranchised and additional housing market failure.
6. EQUALITY AND DIVERSITY IMPLICATIONS
6.1 There are no direct equality and diversity implications resulting from this report.
7. COMMUNICATION ISSUES
7.1 There are no specific stakeholder communication issues resulting from this report.
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8. CONCLUSION
8.1 The LCRCA should continue to prioritise development of brownfield sites and should also use its resources to quantify the funding required to develop brownfield sites within the City Region for housing. When accurate figures have been developed the LCRCA team should then consider the most appropriate funding streams to kick start housing development on these sites.
KIRSTY PEARCE LCRCA Director of Policy and Strategic Commissioning
Contact Officer(s): Mark Dickens – LCRCA Lead Officer Spatial Planning (0151 330 1382)
Page 275 This page is intentionally left blank Agenda Item 15
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authority/Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE DIRECTOR OF POLICY AND STRATEGIC COMMISSIONING
THE CONDITION OF THE KEY ROUTE NETWORK (KRN): KEY ISSUES AND NEXT STEPS
1. PURPOSE OF REPORT
1.1 The aim of this report is to update members on the key issues arising from a Highways Infrastructure Asset Management Plan (HIAMP) that has been commissioned in respect of the Combined Authority’s defined Key Route Network (KRN) of local roads.
1.2 This has been undertaken to quantify and rank the condition of the KRN on a consistent basis across the six constituent local authorities, and to provide a firm evidence base on the condition of this network. This is an important starting point in guiding the prioritisation of future policy interventions and the allocation of funding across the KRN in future years.
1.3 The five appendices to this report highlight the condition of the network on a map basis and also the top scoring priority sites requiring either structural maintenance or preventative maintenance.
1.4 In the immediate term, the report also seeks approval for two specific actions:-
a) To finalise a Local Government Act 1972 section 111 Agreement to restrict the exercise of the legislative powers that are available to the Authority to assume legal responsibility for the KRN until a later date to be agreed by all parties. This is to avoid ambiguity around KRN responsibilities and liabilities during the current transitional period, recognising that the Authority is not currently in a position to manage this network on behalf of the constituent local authorities; and
b) Approval to disburse £3 million that has previously been allocated by the Combined Authority to support the maintenance of the KRN. Specifically, approval is sought to disburse this as per Option 2a within the table in Appendix Five to this report, as per the rationale set out in section 5.3.
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1.5 The report will be followed up by a more detailed report setting out more specific implications and policy and funding recommendations in respect of the Key Route Network.
2. RECOMMENDATIONS
2.1 It is recommended that the Liverpool City Region Combined Authority:
(a) Notes the key issues arising from the Highways Infrastructure Asset Management Plan (HIAMP) developed by Capita and Xais in respect of the Key Route Network, in particular the very significant maintenance backlog, affecting Liverpool most acutely, and the importance of a preventative maintenance life cycle planning regime in providing best value-for- money;
(b) considers a follow-up report on the main funding and operational implications associated with this evidence base and suitable models to allocate funding to support the effective management on the KRN in future;
(c) delegates responsibility to the Authority’s Monitoring Officer to progress a section 111 legal agreement with the six constituent local authorities to confirm that responsibility for the KRN remains with the constituent local authorities until otherwise proposed, and subsequently agreed, to avoid any ambiguity or confusion around liabilities; and
(d) agrees to delegate the disbursement of the pre-agreed £3 million allocation in 2018/19 to support the maintenance of the KRN to the Authority’s Treasurer, as per Option 2a (the allocation of 25% of fund by need and 75% by KRN length), as set out within the table in Appendix Five and as per the rationale in section 5.3 of the report.
3. BACKGROUND
3.1 Members will recall that the establishment of a Key Route Network (KRN) of strategically important local roads, and the creation of a single asset management plan formed an important element of the 2015 Devolution Deal with Government. The agreement stated that:-
“…[A] Key Route Network of local roads…will be managed and maintained by the Combined Authority on behalf of the City Region Mayor, from May 2017. This will be achieved through a single asset management plan, working towards streamlined contractual and delivery arrangements across the City Region”
3.2 This power and commitment to moving towards a more strategic approach to management of local roads stems from historic arrangements; the five Merseyside local authorities have been responsible for managing their respective highway networks since the abolition of Merseyside County Council in 1986, and Halton has been the highway authority since its became a unitary authority in 1998.
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3.3 Members of the Authority agreed the criteria for, and the definition of the Key Route Network at their meeting of 15 April 20161. In agreeing this report, members acknowledged the significant benefit that a more co-ordinated approach would deliver in managing this network of roads, including:-
a more consistent approach to delivery and highway standards across the City Region, which may include such elements as lighting standards, maintenance regimes, winter maintenance, cleansing and road works; significant economies of scale, through the ability to procure and deliver on a cross-boundary basis; potential staffing benefits for smaller authorities in particular, through the ability to pool services and efforts; and efficiencies may also be achieved by working towards the amalgamation of delivery arrangements and contracts.
3.4 Members will also appreciate fully the wider, and very significant transport benefits that stem from the Devolution Deal. These include access to new gainshare funds (£30 million over 30 years) as part of a new Strategic Investment Fund that is funding very significant transport enhancements across the city region, and enhanced powers over local bus and rail networks. The confirmation of the £134 million Transforming Cities Fund allocation in November 2017 came as a further, direct benefit of the Mayoral Combined Authority model of governance.
3.5 The Key Route Network represents some 11% of the total Liverpool City Region highway network. It is made up of 801.295 km of adopted broken down as follows:-
2 km of Motorway, 669.244 km of Principal A Roads, 61.536 km of Classified B Roads, 12.383 km of Classified C Roads and 56.119 km of Unclassified Roads.
3.6 The spatial extent of the KRN across the local authorities varies, as shown in the chart that follows. As can reasonably be expected, Liverpool has the largest share of overall KRN, and St Helens has the smallest share.
1 http://councillors.knowsley.gov.uk/documents/s42374/Final%20Key%20Route%20Network.pdf?StyleType=st andard&StyleSize=none
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KRN Distribution Across Combined Authoritiy
14% 15% Halton Knowsley 13% 14% Liverpool Sefton
18% St Helens 26% Wirral
source: Capita / Xais, 2018)
4. BUILDING THE EVIDENCE BASE ON THE KRN’S CONDITION
4.1 As reported to members in June 20172, an important starting point in this process of managing and improving the KRN entailed the commissioning of a detailed evidence base of the condition of each length of the KRN and to understand its condition on a more consistent footing for the first time. This is because the constituent local authorities currently have their own approaches to measuring the condition of their local highway networks. Capita and Xais were commissioned in early 2017 to lead upon this extensive piece of work, with a total value of £433,000. This brief will also include a review of progress over the next 5 years.
4.2 An objective of the work was to lay out in a clear and transparent manner how the LCR manages its highway assets, and how it intends to keep them safe for use and fit for purpose. It is important to stress that this condition survey looked only at the carriageway, meaning that this process should be applied in future to wider KRN assets, footways, highways structures, street lighting and drainage shall be evaluated in future productions.
4.3 It is also prudent to note that a new code of practice (“Well Managed Highway Infrastructure”) has been published by the UK Roads Liaison Group3. This is not a statutory document but it is meant to guide responsible authorities in highway management and is set to profoundly change the future direction of the UK’s highway maintenance and management. This is through the application of good
2 http://councillors.knowsley.gov.uk/documents/s48135/The%20Development%20of%20a%20Key%20Route% 20Network%20of%20Local%20Roads%20- %20A%20Progress%20Update.pdf?StyleType=standard&StyleSize=none
3 http://www.ukroadsliaisongroup.org/en/codes/
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asset management principles and adoption of a risk based approach. Adoption of the new code is expected to be tested in the courts, especially where local highway authorities are seeking to defend third party liability claims, such as damage to vehicles from potholes. The existence of the new evidence base for the KRN, available through the HIAMP, will be especially significant from a legal and liabilities perspective.
4.4 To populate the HIAMP, consistent highway condition surveys have been undertaken to understand the condition of the KRN on a consistent footing. This was followed by a detailed scoring and value-based assessment based on two principal criteria:
The condition of carriageway and carriageway deterioration rates (e.g. ranging from minor cracking to structural deterioration) and
Site location and safety Information (e.g. the ride quality, economic importance of the route and rate of deterioration)
4.5 Lifecycle planning is essential for asset management. It is the planning of treatments in a strategic way to extend the life of an asset. To enable lifecycle plans for highways maintenance to have credence and to be useful in any modelling terms there is a requirement to use a standard basket of treatments. The following have “basket” of treatments for modelling:
Planned Works Structural intervention – typically reconstruction Planned Works Major intervention – typically resurfacing Planned Works Preventative Maintenance Intervention – typically surface dressing to extend the life of the carriageway Reactive Maintenance Works – typically emergency works to ensure the road is safe for its users through surface patching.
4.6 The processes described above have resulted in the completion of a suite of documents that collate and present these results of a comprehensive set of highway asset management activities. The importance in this evidence lies in the fact that it should help to understand service levels and align the LCR’s priorities and spending with the priorities of the residents and users, such as supporting economic growth and facilitating safe and comfortable access for all road users. This information also allows the LCR to plan asset renewal and maintenance schedules in a transparent way and with justifiable and recognised budgets.
4.7 The objective of the HIAMP is to set out in a clear and transparent manner how the Authority should manages the KRN highway assets and how it intends to keep them safe for use and fit for purpose.
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5. KEY ISSUES ARISING FROM KRN CONDITION EVIDENCE BASE
5.1 The condition of the KRN
5.1.1 In headline terms, the principal conclusion from the work is that the condition of the highway network is degrading, and that current funding is not at a level to properly address the maintenance backlog of the highway network. The HIAMP’s analysis shows that to maintain current levels of service (i.e. maintain a steady state) that:
approximately £12 million is required per annum for Structural Maintenance; approximately £2.5 million is required for Preventative Maintenance; and the current maintenance need “backlog” is approximately £56.8 million
5.1.2 To provide funding context, then historically, most capital highway maintenance, whether for structural or preventive maintenance, has stemmed from a Highways Maintenance grant from the Department or Transport. Based on indicative allocations published in 2014, this would equate to around £16.5 million across the LCR for the current financial year, taking into account other top-up payments4. This represents around 25% of the actual funding that is estimated to be needed to effectively maintain the KRN.
5.1.3 That said, these specific allocations from government have now been superseded by an un-ringfenced £26.5m per annum Transport Budget within the wider Strategic Investment Fund, managed by the Combined Authority. However, the scope of this new fund extends beyond highway maintenance alone and is used to fund a wider range of transport wider demands, such as traffic management, road safety and multi-modal transport enhancements. An immediate issue flagged in the HIAMP thus concerns the need to identify alternative means by which to fund the maintenance backlog and allow a steady state of maintenance to be adopted.
5.1.4 The charts below summarises the significant maintenance that is needed, given that 16% of the KRN requires structural maintenance and 39% is in need of preventative maintenance:-
4 https://www.gov.uk/government/publications/highways-maintenance-funding-allocations-201516-to-202021
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(source: Capita / Xais, 2018)
5.1.5 The chart overleaf shows changes from 2017, notably the worsening in structural maintenance standards and the general reduction in the proportion of “up to standard” highways. This has been exacerbated by the very cold and wet winter of 2017/18.
KRN Treatment Distribution Source AEI survey 2017
8% Structural Maintenance 34% Preventative Maintenance Up to Standard As New 47% 11%
(source: Capita / Xais, 2018)
5.1.6 Looking at the spatial location of the maintenance backlog, the more detailed maps in Appendix One and Two highlight the priority areas requiring structural intervention (resurfacing) and priority areas for preventative maintenance within the KRN.
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5.1.7 Appendix Three and Four summarise, in rank order, the top 20 sites requiring structural and preventative maintenance, respectively. In other words, the highest priority sites are those in the worst condition, as reflected by their higher scores.
5.1.8 Whilst the backlog is an issue affecting the city region as a whole it will be appreciated that the majority of KRN roads requiring urgent structural maintenance are within the City of Liverpool. Similarly, the maintenance backlog in Liverpool is especially acute, meaning that interventions on these roads demand the highest priority in terms of evidenced need, having regard to the new Code of Practice described above, and which promotes best asset management practices and the management of risk. In practice, this warrants an increase in the weighting of LCR-wide maintenance funding towards Liverpool’s share of the KRN, as per the evidence presented.
5.1.9 In strategic terms, it will be appreciated that Liverpool, as the largest local authority area, forms the hub of the city region from an employment, retail, educational, office and transport and commuting perspective. As such, ensuring the safe and efficient movement of vehicles and people within Liverpool is integral to the economic attractiveness and economic wellbeing of the city region as a whole. This does not negate the need to invest heavily in the KRN across the other five local authority areas, given that highway networks do not respect administrative boundaries, but the evidence from the HIAMP demonstrates that the greatest initial needs exist in Liverpool and demand priority action.
5.1.10 In recognition of its legacy, Liverpool City Council is investing from its own resources in the renewal of the highway network through its Better Roads programme. This includes a £200 million programme of major reconstruction, resurfacing and emergency pothole repairs over the next five years. Other local authorities are also investing in the maintenance of their roads from wider budgets available to them, e.g. as part of transport schemes that are being funded from the Strategic Investment Fund.
5.1.11 The HIAMP document identified a range of lifecycle scenarios and approaches to guide the way that funds that become available are spent on the right schemes at the right time. It also seeks to ensure that schemes are prioritised using optimisation methodologies to maximise risk reduction and minimise whole life costs. Three scenarios have been used:-
Scenario1 – Carry out typical preventative maintenance measures.
Scenario 2 – Carry out a reactive maintenance regime, ensuring the road is safe for passage. This would involve typically involve reactive maintenance patching
Scenario 3 – Carrying out typical preventative maintenance beyond the optimum time for intervention i.e. sweating the asset
5.1.12 In policy terms, the HIAMP commends Scenario 1 as the lifecycle offering the best Value for Money and over the other two scenarios. The HIAMP
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summarises that for every £203.34 spent on Scenario 1 (preventative maintenance) on a specific hierarchy of roads, the LCR would need to spend £522.04 on Scenario 2 (reactive maintenance) and £227.90 on Scenario 3 (asset sweating).
5.1.13 The issues arising from the HIAMP work are numerous and complex, and will form the basis of a more detailed follow-on report which will identify some of the main policy and funding issues and responses. This is with the fundamental aim of securing greater consistency of approach across the city region, and to move towards a more consistent and higher standard of KRN. Some of these wider issues will include:-
Maintenance policies across the city region (e.g. on skid resistant surfacing and construction standards) Intervention policies and criteria across the LCR (e.g. response times to incidents and failures on the network), Methodologies for allocating funds to best support the recommendations set out in the HIAMP evidence base and which address the imperative to tackle the maintenance backlog in the most effective, and logical way Staffing implications, including the need for dedicated resources to support the management and maintenance of the KRN
5.2 Legal highway provisions and the KRN
5.2.1 In the immediate term, there is a need to progress legal provisions that concern the management of, and the Combined Authority’s and local authorities’ liabilities for the KRN. The Order that established the Mayoral Combined Authority in 2017 enables the Authority to have responsibilities for the Key Route Network at a future point, including powers to make Traffic Regulation Orders and carry out road safety measures.
5.2.2 At some point the local authorities and the Combined Authority would need to consent to transfer highway powers over the KRN to the Combined Authority. At the present time, it is recommended that the Combined Authority agrees not to exercise these powers, as the evidence base for the KRN and its future management remains a work in progress. The agreement under section 111 of the 1972 Local Government Act that has been drafted confirms that the local authorities will retain this legal responsibility until a later date in order to avoid ambiguity and clarify where liabilities rest.
5.2.3 Delegated authority is sought to allow the Monitoring Officer to progress this agreement with the constituent local authorities.
5.3 Disbursing topsliced KRN maintenance funding available in 2018/19
5.3.1 Members may recall that a draft budget has been allocated for the KRN for the current financial year. This was agreed as part of a wider report agreeing
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the allocation of the 2018/19 transport budget in November 20175. This committed that the HIAMP approach would inform the evidence base upon which to prioritise a £3m topslice of the Capital Maintenance fund to directly support the KRN.
5.3.2 Although an arbitrary figure, the HIAMP document recommends that this £3m of top sliced funding should be split into:-
£2.5m for structural maintenance £0.5m for preventative maintenance
5.3.3 Notwithstanding the clear policy support in the HIAMP, and referenced above on preventive maintenance as well as structural maintenance as part of an effective asset management regime, it is proposed that all of the £3m million that is available this financial year is allocated for remedial structural works only, rather than for any preventive maintenance. This reflects the fact that the funding is available to spend during the current financial year, and it is not possible to procure and complete preventative maintenance successfully, as the working window for such works is from April to September each year. This is considered a pragmatic approach based on the time of year.
5.3.3 The table is Appendix Five to this report sets out a series of options for disbursing the funding, intended to provide context and transparency. These options range from a “worst first” approach based on the HIAMP’s prioritised list of top scoring structural maintenance schemes in Appendix 3 to this report, to permutations that factor in more established formulae. These formulae factor in the relative length of the KRN in each local authority area, or else historic government funding formulae, and which result in a greater spreading of the funding across the city region.
5.3.4 The evidence within the HIAMP advocates that the funding is disbursed wholly by need, as per Option 1 in the table. Conversely, disbursing all of the funding to each of the local authorities on an equal share or formulaic basis would not be appropriate, given that such an approach would conflict with the evidence base in the HIAMP. Neither would such an approach maximise its ability to help address the KRN’s maintenance backlog in the most effective way.
5.3.5 However, on balance, and having regard to feedback from members of the Combined Authority, by allocating all of the funding by need (Option 1) would constitute a very significant and very rapid policy shift, at a time that the KRN concept is still evolving. The retention of formula as part of the approach is a reasonable step and represents a helpful move toward achieving a positive way forward. This is also against a backdrop of a maintenance backlog across the city region’s KRN as a whole.
5.3.6 As such, it is proposed that Option 2a in the table in Appendix Five is applied, which would entail the allocation of:-
5 http://councillors.knowsley.gov.uk/documents/s50923/Item%206%20- %20Report.pdf?StyleType=standard&StyleSize=none
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25% of the funding by need, using the HIAMPs’ evidence; and 75% by the relative length of the KRN in each local authority area
The retention of an element of a formulaic approach is considered reasonable, and a pragmatic approach in the transition from a longstanding formulaic reallocation of most monies, towards an evidence-based approach to allocating funds, as advocated by the HIAMP. It therefore demonstrates a move away from historic approaches to allocating funding and towards a more sophisticated way that supports the principles agreed as part of the Devolution Deal.
5.3.7 It is proposed that delegated authority is granted to the Treasurer to confirm the details of the ensuing payments to each of the local authorities, and develop an appropriate funding agreement for this. This would also ensure that the additional funding is used to fund schemes or priorities that have no alternative funding routes, in order to maximise its effectiveness and coverage. It will also be stipulate that local authorities should prioritise their share of the funding allocation to support their highest priority structural maintenance schemes, as per the ranked list in the HIAMP document.
6. RESOURCE IMPLICATIONS
6.1 Financial
The implications are potentially significant. The evidence set out within the HIAMP advocates a change in the way that highways maintenance capital funds are allocated, and a move away from a formulaic re-allocation of resources to each local authority towards a needs-based model, based on the surveyed condition of the KRN. As the maintenance backlog is especially acute in Liverpool, the evidence warrants a greater proportion of funding being allocated to the KRN within City of Liverpool.
The evidence also highlights the significant backlog of highways maintenance on the KRN across the city region, and the very significant additional resources that would be needed to bring the condition of the KRN up to standard.
However, there are also likely to be significant resource implications associated with moving towards a more streamlined and consistent approach to managing the Key Route Network through consolidated contractual arrangements, and as a result of changes to intervention levels and standards. These cannot be quantified at this stage.
In the immediate term, the report also proposes a transitional and pragmatic means by which to disburse £3m of funding that has previously made available by the Combined Authority to support the maintenance of the KRN.
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6.2 Human Resources
The creation of a centralised or consolidated Key Route Network team is likely to have financial implications for the Authority and/or the constituent local authorities. It is worth noting that most Combined Authorities and Mayoral Combined Authorities either have, or are establishing dedicated teams to deal specifically with the management of their Key Route Networks.
6.3 Physical Assets
This report highlights the maintenance backlog that exists on one of the city region’s most significant physical assets, namely its Key Route Network. The report identifies the need for significantly greater levels of funding to address the backlog, and a move towards a “needs based” approach to the allocation of funding in future.
6.4 Information Technology
There are no direct implications arising from this report.
7. RISKS AND MITIGATION
7.1 A poorly maintained Key Route Network brings with it significant risks to road users through damage to vehicles and as a consequence of personal trips and falls. This in turn presents legal and financial risks to the local authorities as the local highway authorities. There is also a risk that a poorly maintained highway adversely affects levels of sustainable trip making and potentially, future economic investment decisions.
7.2 The standardisation of service delivery and intervention standards, to bring consistency to the Key Route Network, may present financial and investment risks, whereby more costly standards are subsequently agreed in recognition of the importance and status of the Key Route Network. This will be the subject of a follow-on report.
7.2 There are also reputational risks associated with a failure to move towards a streamlined and enhanced Key Route Network management regime, building on the evidence set out within this HIAMP, as this forms a core component of the devolution deal agreed with Government in November 2015.
8. EQUALITY AND DIVERSITY IMPLICATIONS
8.1 No direct implications as a result of this report. More detailed workstreams will give further consideration to the equality and diversity implications of any new KRN operating models, investment proposals or delivery arrangements.
8.2 It is important to note that the underlying aim of the KRN regime is to improve conditions for all users of the highway and to bring greater clarity and consistency to anyone wishing to use, or work upon the Key Route Network
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9. COMMUNICATION ISSUES
9.1 The HIAMP will be important as a communication tool for elected members and members of the public alike, to aid the public’s understanding the rationale for particular maintenance regimes (e.g. the importance of preventative maintenance) and associated investment decisions on the KRN.
9.2 Should the management of the KRN evolve to a more centralised model of management at a Combined Authority level, then it will be imperative that a communications plan is developed. This is so that clarity exists as to roles and responsibilities amongst utility companies, statutory undertakers and so forth and so that queries, complaints and fault reporting from members of the public and elected members are directed to the relevant contact points.
10. CONCLUSION
10.1 This report updates the Combined Authority on the key issues arising from a Highways Infrastructure Asset Management Plan (HIAMP) that has been commissioned in respect of the Combined Authority’s defined Key Route Network (KRN) of local roads. The work sought to assess the condition of the KRN on a consistent basis across and to provide a firm evidence base on the condition of this network. This is an important starting point in guiding the prioritisation of future policy interventions and the allocation of funding across the KRN in future years.
10.2 In headline terms, the principal conclusion from the work is that the condition of the highway network is degrading, and that current funding is not at a level to properly address the maintenance backlog of the highway network. The HIAMP’s analysis shows that to maintain a steady state, a significant increase in resourcing is required.
10.3 In the immediate term, the report seeks members’ approval for two specific actions. The first is to progress a legal agreement to restrict the exercise of legislative powers that are available to the Combined Authority in respect of the KRN until a later date. Secondly, approval is sought to disburse £3 million that has previously been allocated by the Combined Authority to support the maintenance of the KRN. Specifically, approval is sought to disburse this for structural maintenance as per Option 2a in the table in Appendix Five. This would entail the allocation of 25% of fund by need and 75% by KRN length as a pragmatic and transitional approach in moving from a formulaic to an evidence-based approach to allocating funds across the city region.
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10.4 The report will be followed up by a more detailed report setting out more specific implications and policy and funding recommendations in respect of the Key Route Network.
KIRSTY PEARCE Director of Policy and Strategic Commissioning
Contact Officer(s): Mick Noone, Director of Integrated Transport, Merseytravel Huw Jenkins, Transport Policy Lead Officer, Policy and Commissioning Directorate, LCR Combined Authority
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Appendices:
Appendix One - Areas of Structural intervention (Resurfacing) within the KRN Appendix Two - Areas requiring Preventative Maintenance within the KRN Appendix Three - Ranked list of KRN roads requiring remedial structural maintenance Appendix Four - Ranked list of KRN roads requiring preventative maintenance Appendix Five - Options for disbursing £3 million KRN Funding Topslice in 2018/19
Background Documents:
LCR Combined Authority Highways Infrastructure Asset Management Plan, August 2018, Xais/Capita Liverpool City Region Combined Authority, Lifecycle Planning & Forward Works Programme, August 2018, Xais/Capita Management System – Highways Infrastructure Asset Management Plan, XAIS/Capita
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Appendix One Plan showing areas of Structural intervention (Resurfacing) within the KRN
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Appendix Two Plan showing areas requiring Preventative Maintenance within the KRN
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Appendix Three Top 20 “worst first” ranked list of KRN roads requiring remedial structural maintenance
Rank SECTION ROAD N0 SECTION DESCRIPTION START END LENGTH TREATMENT VM DISTRICT SCORE 1 19501214/998 A561 SPEKE BOULEVARD(FORDS 300 372 72 CW - Patching (Machine 311 KNO EXIT) from FACTORY GATES Laid) to SPEKE BVAR 2 A5047/120 A5047 Holt Road to LAUREL ROAD 350 400 50 CW - Resurface 223 LPL 3 B5178/107.1 B5178 WOOD LANE to KINGS DRIVE 0 1184 1184 CW - Resurface & Binder 201 LPL 4 B5178/107.5 B5178 WOOD LANE to KINGS DRIVE 900 1184 284 CW - Resurface 158 LPL 5 A5036/125.1 A5036 A5036 to Regent Street 0 694 694 CW - Resurface 156 LPL 6 294 Page M62/110 M62 TBC 0 1007 1007 CW - Resurface 153 LPL 7 A580/150 A580 LOWER BRECK ROAD to 300 499 199 CW - Resurface 152 LPL OAKFIELD ROAD 8 A5046/105 A5046 A5038 to A59 0 354 354 CW - Resurface 152 LPL 9 A561/197.5 A561 UPP WARWICK ST to 0 348 348 CW - Resurface 150 LPL PARLIAMENT ST 10 A580/510 A580 A5058 to MILL LANE 0 940 940 CW - Resurface & Binder 146 LPL 11 A5049/128 A5049 Silverdale Avenue to LOWER 0 650 650 CW - Resurface 145 LPL BRECK ROAD 12 B5178/116.1 B5178 BARNHAM DRIVE to Paignton 0 100 100 CW - Resurface 144 LPL Road 13 A580/334 A580 FLORENCE STREET to 0 279 279 CW - Resurface 144 LPL LANGHAM STREET 14 A5036/126 A5036 SALTNEY STREET to A5054 0 564 564 CW - Resurface 144 LPL 15 A5036/131 A5036 A5055 to A5056 0 488 488 CW - Resurface 142 LPL 16 A580/150 A580 LOWER BRECK ROAD to 0 200 200 CW - Resurface 142 LPL OAKFIELD ROAD 17 A5036/130 A5036 A5054 to A5055 0 647 647 CW - Resurface 138 LPL 18 B5178/106 B5178 CALDWAY DRIVE to WOOD 0 194 194 CW - Resurface 137 LPL LANE
Rank SECTION ROAD N0 SECTION DESCRIPTION START END LENGTH TREATMENT VM DISTRICT SCORE 1A5058/130 A5058 SLIP RD ON N to A57 400 613 213 CW - Resurface 133 LPL 19 PRESCOT RD 20 A57/150 A57 KENSINGTON to DAULBY 0 403 403 CW - Resurface 132 LPL STREET
Page 295 Page
Appendix Four Top 20 “worst first” ranked list of KRN roads requiring preventative maintenance
VM Rank SECTION ROAD No. SECTION_DESCRIPTION START END LENGTH TREATMENT_DESC LA SCORE 1 CW - Micro-Asphalt with A57/155 A57 ANSON STREET to DAULBY STREET 0 220 220 225 LPL >10% Patch 2 A5038/130 A5038 LONDON ROAD to RENSHAW STREET 0 200 200 CW - Maintenance Patch 218 LPL 3 CW - High Friction GRP/P102/040 A58 FRECKLETON ROAD TO MARGERY ROAD 0 150 150 200 STH Surfacing 4 CW - Micro-Asphalt with A580/155 A580 BELMONT ROAD to BRECKFIELD ROAD 0 230 230 183 LPL >10% Patch 5 CW - Micro-Asphalt with A5038/115 A5038 RANELAGH STREET to LIME STREET 0 157 157 181 LPL
Page 296 Page >10% Patch 6 BENTHAM DRIVE to CHILDWALL VALLEY CW - High Friction B5178/117 B5178 0 226 226 169 LPL ROAD Surfacing 7 CW - Surface Dress with NEW/C198/010 A572 ACACIA STREET TO LYME STREET 0 117 117 166 STH <10% Patch 8 MERTON ROAD A5057 WASHINGTON CW - Surface Dress with A/313115/015 313115 0 185 185 160 SEF PARADE TO STANLEY ROAD <10% Patch 9 CW - Surface Dress with A57/135 A57 ST OSWALDS STREET to GREEN LANE 0 410 410 157 LPL >10% Patch 10 CW - Surface Dress with A580/338.5 A580 BULLENS ROAD to WALTON LANE 0 851 851 155 LPL >20% Patch 11 STANDRING GARDENS TO FRECKLETON CW - High Friction GRP/P102/035 A58 0 54 54 150 STH ROAD Surfacing 12 CW - Micro-Asphalt with A5038/190 A5038 BOUNDARY to WESTMINSTER ROAD 0 279 279 148 LPL >10% Patch 13 CW - Surface Dress with A561/110 A561 SPEKE HALL RD to WOODEND AVENUE 0 1089 1089 147 LPL >10% Patch 14 CW - Surface Dress with NEW/C132/025 A572 MARIAN AVENUE TO CROW LANE WEST 0 299 299 142 STH <10% Patch 15 CW - Surface Dress with A57/140.1 A57 B5189 to Frogmore Road 0 572 572 141 LPL >10% Patch
VM Rank SECTION ROAD No. SECTION_DESCRIPTION START END LENGTH TREATMENT_DESC LA SCORE 16 CW - Micro-Asphalt with A5038/186 A5038 Brewster Road to BOUNDARY 0 174 174 140 LPL >10% Patch 17 CW - Surface Dress with NEW/C132/010 A572 WHARF ROAD TO COMMON STREET 0 48 48 138 STH <10% Patch 18 CW - Surface Dress with NEW/C132/015 A572 COMMON STREET TO SHORT STREET 0 52 52 138 STH <10% Patch 19 CW - Surface Dress with NEW/C132/005 A572 BOROUGH BOUNDARY TO WHARF ROAD 0 161 161 138 STH <10% Patch 20 CW - Surface Dress with NEW/C132/020 A572 SHORT STREET TO MARIAN AVENUE 0 266 266 138 STH <10% Patch
Page 297 Page
Appendix Five Options for disbursing £3 million Key Route Network Funding Topslice in 2018/19 (preferred option in red type)
Local Option 1 Option 2 Option 2a Option 2b Option 2c Option 3 Option 3a Option 3b Option 3c Authority allocate Allocate Allocate Allocate Allocate Allocate Allocate Allocate Allocate full £3m by full £3m by 25% of 50% of 75% of full £3 25% of 50% of 75% of HIAMP KRN length fund by fund by fund by million by fund by fund by fund by need need and need and need and historic need and need and need and (estimated) 75% by 50% by 25% by DfT 75% by 50% by 25% by KRN length KRN KRN length formula DfT DfT DfT Page 298 Page length formula formula formula Halton 0 15% £338k £225K £113k 13.18% £297k £198k £99k £450K £396k Knowsley £15k 14% £319k £218k £116k 10.95% £250k £172k £83k £420k £329k Liverpool £2.985m 26% £1.33m £1.88m £2.434m 24.92% £1.307m £1.864m £2,426k £780k £748k St Helens 0 13% £293 £195k £98k 14.30% £322k £215k £107k £390k £429k Sefton 0 18% £405 £270k £135k 17.11% £385k £257k £128k £540k £513k Wirral 0 14% £315 £210k £105 19.54% £440k £293k £147k £420k £588k £3m £3m £3m £3m £3m £3m £3m £3m £3m
Agenda Item 16
LIVERPOOL CITY REGION COMBINED AUTHORITY
To: The Metro Mayor and Members of the Combined Authority
Meeting: 19 October 2018
Authorities Affected: All
EXEMPT/CONFIDENTIAL ITEM: No
REPORT OF THE TREASURER
COMBINED AUTHORITY BUDGET MONITORING STATEMENT & TREASURY MANAGEMENT POSITION UPDATE TO 30 SEPTEMBER 2018
1. PURPOSE OF THE REPORT
1.1 The purpose of this report is to provide members of the Liverpool City Region Combined Authority with a financial update for the revenue and capital activity for the period April to 30 September 2018 and an update on its treasury management activity.
2. RECOMMENDATIONS
2.1 Liverpool City Region Combined Authority is recommended to: -
(a) note the contents of the Combined Authority Budget Monitoring Statement. (b) approve the revised revenue budget for the Combined Authority. (c) approve the release of £1.25m from the Transport Infrastructure Reserve to Merseytravel to support the delivery of the smart ticketing work stream. (d) note the contents of the Treasury Management position update. (e) approve the updated Treasury Limits and Prudential Indicators.
3. BACKGROUND
3.1 The Combined Authority established its budget for 2018-19 at its meeting of 2 February 2018. The approved budget included a significantly higher level of spend in respect of CA non transport functions to address the capacity issues faced by the Combined Authority in previous years. The budget was based on an assumed structure which was developed prior to the appointment of key directorate posts within the CA. Since the appointment of the Director for Commercial Development and Investment and the Director of Policy and Strategic Commissioning in April and June respectively, a significant body of work has been undertaken to shape and inform the actual structures required in these areas. Consequently, a revised budget is put forward for consideration.
Page 299 3.2 The Combined Authority has delegated detailed financial and performance monitoring with respect to transport activities to the Transport Committee, however all strategic financial decisions remain with the Combined Authority.
3.3 The financial performance of the Combined Authority is shown in Section 4 of this report. An update on the Treasury Management activity and revised Prudential Indicators is provided in Section 5.
4. FINANCIAL REPFORMANCE
4.1 Revenue Performance
4.1.1 The table below provides an overview of the Combined Authority’s allowed revenue budget to its revised revenue budget.
Table 1 – Liverpool City Region Combined Authority Revised to Allowed Budget Statement to 30 September 2018.
Allowed Revised Variance Budget Budget £’000 £’000 £’000 CA Running Costs 7,043 8,043 (1,000) Mayoral Priority Fund 1,600 1,600 - Merseytravel Operating Grant 92,020 92,100 (80) Mersey Tunnels Operating Grant 28,467 28,467 - Capital Financing Costs 14,312 14,312 Halton Transport Grant 3,123 3,123 - Special Rail Grant 86,957 86,957 - Capital Grant to Merseytravel 2,720 3,890 (1,170) Total Revenue Cost 236,242 238,492 (2,250) Funded by: Transport Levy (95,400) (95,400) - Halton Differential Levy (3,123) (3,123) - Tunnels Tolls Income (40,700) (40,700) - Transitional Funding (6,197) (6,197) - Application of Reserves (3,865) (5,115) 1,250 Special Rail Grant (86,957) (86,957) - Mayoral Capacity Grant - (1,000) 1,000 Total Income (236,242) (238,492) 2,250 Net Budget Requirement - - -
4.1.2 Overall the revised revenue budget for the Combined Authority remains balanced however gross income and expenditure have increased from the allowed budget by £1m as a consequence of late notification of receipt of Mayoral Capacity Grant. This grant is a one off grant payable in financial years 2018-19 and 2019-20 provided to support capacity building and associated works within Mayoral Combined Authorities. This funding has supported the increased costs arising from the increased requirement for posts within the Policy establishment.
4.1.3 The revenue and capital grants to Merseytravel have increased with a corresponding increase in the use of reserves to fund these increased costs. The Page 300 increased expenditure relates to work to progress a smart ticketing work stream. As this work is additional and in support of a key Mayoral priority, the costs associated with this work stream are to be funded from the Transport Infrastructure Reserve.
4.1.4 As indicated at 3.1, since the appointment of the Directors of Commercial Development and Investment and Policy and Strategic Commissioning, a significant body has been done to refine and populate structures within the Combined Authority and revise the budget. Members will note that the revised expenditure budget for Authority running costs has increased by £1m but that this is offset by an increase in income through the receipt of a Mayoral Capacity Grant of £1m.
4.1.5 The table below provides a more detailed analysis of the revised budget and projected outturn spend for the Combined Authority.
Table 2 – Liverpool City Region Projected Outturn to 30 September 2018
Revised Projected Variance Budget Outturn £’000 £’000 £’000 CA Running Costs 8,043 6,771 1,272 Mayoral Priority Fund 1,600 1,600 - Merseytravel Operating Grant 92,100 92,100 Mersey Tunnels Operating Grant 28,467 28,467 Capital Financing Costs 14,312 14,312 Halton Transport Grant 3,123 3,123 Special Rail Grant 86,957 86,957 Capital Grant to Merseytravel 3,890 3,890 Total Revenue Cost 238,492 237,722 1,272 Funded by: Transport Levy (95,400) (95,400) Halton Differential Levy (3,123) (3,123) Tunnels Tolls Income (40,700) (40,700) Transitional Funding (6,197) (6,197) Application of Reserves (5,115) (3,843) (1,272) Special Rail Grant (86,957) (86,957) Mayoral Capacity Grant (1,000) (1,000) Total Income (238,492) (237,722) (1,272) Net Budget Requirement - - -
4.1.6 The projected outturn shown in the table above is based on forecast expenditure for the full year and known commitments. At the midpoint in the year, projected outturn spend is showing an underspend which is reducing the requirement for funding from reserves to balance the budget. The projected underspend has arisen in part as a consequence of the structure for the Combined Authority evolving in the early part of the year and a number of post being filled on a part year basis and certain activities being delayed. To the extent that new activities come forward or posts are filled sooner than estimated for projection purposes, the projected underspend may be reduced. It is envisaged that these underspends will be one off items and future years spend will be in line with revised budget projections.
Page 301 4.1.7 The table below provides a more detailed breakdown of the projected revenue spend against budget for the Combined Authority’s running costs.
Table 3 - Liverpool City Region Combined Authority Projected Revenue Outturn to 30 September 2018 Direct Combined Authority Running Costs
Revised Projected Variance Budget Outturn £’000 £’000 £’000 Mayoral Office Direct Costs 274 274 - Communications & Stakeholder 575 477 98 Engagement Chief Executives Office 402 255 147 Policy & Commissioning 1,800 1,485 315 Employment and Skills 804 804 - Households into Work 400 400 - Commercial Development & Investment 1,639 1,176 463 Corporate Services 1,599 1,350 249 Transport: Bus Alternative Service 550 550 - Delivery CA Running Costs 8,043 6,771 1,272 Mayoral Priorities Fund 1,600 1,600 - Total Running Costs 9,643 8,371 1,272
4.1.8 The Mayoral Priority Fund is being used to support a number of the Metro Mayor’s key priorities including:
Tidal energy; Digital connectivity; Cultural programme; Apprentice tickets; and Apprenticeship portal.
Based on current projections, it is envisaged that this allocation will be utilised in full during the years.
4.2 Capital Spend
4.2.1 Within its capacity as the Accountable Body, the Combined Authority receives capital grant in respect of the Local Growth Fund programme, devolution monies received from central government (Gain Share funding) and direct transport related grants. Whilst funding is treated as a single pot, currently the transport elements of the funding are hypothecated to the extent that these are allocated to partners either through allocation or bid to be spent on transport related schemes. The apportionment of this funding was detailed in the February 2018 budget setting report. Gain Share funding has been provided to the Combined Authority to support its devolution agenda.
4.2.2 Local Growth funds have been received by the Local Enterprise Partnership (LEP) on the back of successful bids for these funds with the Combined Authority fulfilling the Accountable Body role for these funds. To date bids have been made and Page 302 received against three rounds of Local Growth Fund allocations with funding provided for specific thematic areas. Whilst a significant proportion of the Local Growth Fund 1 funds have been committed, with the agreement of the LEP, uncommitted Local Growth Fund funds are being administered as part of the single capital pot.
4.2.3 In addition to LGF and Gain Share funding, the Combined Authority has been awarded £134m Transforming Cities Funding over the period 2018/19 to 2021/22. A report was presented to the Authority in May 2018 to approve the acceptance of the award and a subsequent report submitted in July 2018 approving the proposed commissioning approach to be adopted for TCF. In accordance with the single pot approach, TCF funding has been added to the SIF and is therefore subject to the SIF Assurance framework. The funding allocated for 2018/19 through TCF is £10m.
4.2.4 The below provides an analysis of performance to 30 September 2018 in respect of the Local Growth Fund and SIF schemes that have been approved by the Combined Authority, have a signed Grant Funding Agreement and are in delivery.
Table 4 – LGF and Gain Share Monitoring Update to 30 September 2018
Scheme Revised Projected Projected Budget Outturn (Over)/ Underspend £’m £’m £’m STEP 8.414 11.273 (2.859) Halton Curve 5.593 3.398 2.195 A565 North Liverpool Key Corridors 4.312 4.312 - M58 Junction 1 Improvements 4.462 3.862 0.600 Maghull North 0.290 0.290 - A570 Linkway 3.027 3.027 - Silver Jubilee Bridge 1.665 1.714 (0.049) Windle Island 2.528 2.528 - Silver Jubilee Bridge Variation Project 0.931 0.931 - City Centre Connectivity (1) 5.400 3.322 2.078 Myerscough College 0.232 0.209 0.021 Enterprising Future 0.859 0.859 - Digital Starting Point 0.429 0.404 0.025 Extreme Low Energy 0.328 0.330 (0.002) WELD Tech Futures 0.214 0.214 - Health & Engagement Training Hub 3.725 3.725 - Advanced Manufacturing Training 2.999 2.999 - Skills for Growth 0.319 0.319 Alstom 0.261 0.393 (0.132) Seqiris 0.879 0.854 0.025 Alchemy 3 1.414 1.414 - Key Route Network 18.328 13.563 4.765 City Centre Connectivity (2) 6.125 5.747 0.378 IBF 2018 2.800 2.802 (0.002) Internationalisation 0.056 0.056 - Cultural Events 4.350 4.350 - Future Proof M6 0.231 0.231 - Total 80.171 73.126 7.045
Page 303 4.2.5 Based on current projections there is a forecast underspend on the above schemes however it is likely that a number of these will be subject to formal change control requests to rephrase the spending and funding profiles.
4.2.6 The figures above exclude those schemes for which approval to proceed has been granted by the Combined Authority but for which there is no signed Grant Funding Agreement in place. The table below details the funding commitments of the Authority based on the schemes that are currently progressing through to Grant Funding Agreement. Projected outturn for the schemes below are based on the existing profiles and assume spend in year will be in line with current projections.
Table 5 - Schemes progressing through to GFA
Scheme Budget Projected Projected Spend Spend 2018/19 2019/20 >> £’m £’m £’m Liverpool South Work & Wellbeing 0.750 0.750 - Everton Learning & Skills Centre 0.692 0.692 - Littlewoods Studio 4.950 4.950 - Chancerygate 0.949 0.474 0.475 Mere Grange 1.524 1.524 - Quarry Farm 0.465 0.421 0.044 Atlantic Park 0.767 0.722 0.045 Digital Innovation 5.000 0.702 4.298 Pall Mall 3.500 2.500 1.000 Paddington Village 12.000 6.000 6.000 Shakespeare Rail 8.000 8.000 - Shakespeare Playhouse 6.500 2.565 3.935 Liverpool Film and Content Fund 2.200 0.400 1.800 Total 47.297 29.494 17.803
4.2.7 In addition to the above, the Combined Authority has provided initial approval to a number of schemes to progress through to Outline Business case or Full Business Case. Whilst these schemes have not received full approval to proceed to GFA, there is, nonetheless, an assumption that these will progress through and thus there are commitments to fund. The table below details these funding commitments.
Page 304
Table 6 Schemes progressing through to CA Approval
Scheme Provisional Allocation
£’m Parkside 23.800 Moss Nook 2.100 South Whiston 21.170 Earlsfield Park 2.800 Cruise Liner Terminal 20.000 Tower Road 1.500 Unilever 4.540 Growing Business 0.570 Maritime 5.340 Flexible Business Growth 15.00 Wirral Waters Skills Factory 3.200 Daresbury Skills Factory 3.000 Total 103.020
4.2.8 The above schemes are all project to spend by 2021. As these schemes progress through the approval process and to Grant Funding Agreement, more detailed spend profiles will be provided.
5. INTERIM TREASURY MANAGEMENT STRATEGY REPORT 2018/19
5.1 Context
5.1.1 In accordance with the CIPFA Code of Practice for Treasury Management in Public Services, the Combined Authority is required to produce an interim report which provides a review of the Treasury Management Strategy Statement and Annual Investment Strategy, together with an update on investments and borrowing and a review of its Treasury Limits and Prudential Indicators.
5.1.2 The Combined Authority’s Treasury Management Strategy was approved at its meeting on 2 February 2018. At the mid-point in the year it is felt pertinent to provide the Authority with an update on progress against the original approved strategy.
5.1.3 The interim report has been prepared in accordance with CIPFA’s Code of Practice on Treasury Management and covers the following:
an update on interest rates; a review of treasury management strategy statement and annual investment strategy; an update on current investments and borrowing profiles; and a review of compliance with Treasury Limits and Prudential Indicators for 2018- 19 together with forward estimates.
Page 305
5.2 Interest Rates Forecasts
5.2.1 The Authority’s treasury advisors, Link Asset Services have provided the following forecast for interest rates.
Table 7 – Forecasts for Interest Rates
5.2.2 On the back of positive economic statistics at the end of the first quarter of 2018/19, the MPC took the decision to increase Bank Rate to 0.75% at its August 2018 meeting. The MPC did however emphasis that their view was that future Bank Rate increases would be gradual and would rise to a much lower equilibrium than before the financial crash in 2008. Based on Link’s current forecasts, the view is that MPC will increase Bank Rate in September 2019 however the strength of GDP growth, inflationary pressures and the speed and orderliness of Brexit negotiations could impact on future decisions
5.2.3 It is Link’s view that the overall balance of risk to economic growth in the UK is probably neutral there are a number of downside risks to current forecasts for UK gilts and PWLB rates, including the Bank of England’s monetary policy taking action too quickly causing economic growth and inflation to be weaker than anticipated, geopolitical risks in North Korea, Europe and the Middle East, a resurgence of the European sovereign debt crisis and the fallout from trade tariffs imposed by President Trump.
5.3 Treasury Management Strategy and Annual Investment Strategy Update
5.3.1 The Treasury Management Strategy Statement, which includes the Annual Investment Strategy, was considered and approved by the Combined Authority at its meeting on 2 February 2018. The Investment Strategy outlined the Authority’s investment priorities which can be summarised as achieving the best return available on fund whilst maintaining the security of capital and liquidity of investments. The approved Investment Strategy was drafted on the basis of existing guidance and regulation.
5.3.2 MHCLG issued revised investment guidance on 2 February 2018. The revised guidance brought into scope of treasury reporting non-financial asset investments. Page 306 As the investment strategy approved within the Combined Authority’s Treasury Management Strategy Statement for 2018/19 was drafted on the basis of guidance that predated these changes, non-financial assets are not covered within the current investment strategy. Combined Authorities are permitted to make loans to local enterprises, charities, joint ventures as part of a strategy to support economic growth even where those loans may not be seen as prudent if the narrow definition of security and liquidity is applied. The Combined Authority is able to make such loans whilst having regard to the revised guidance if they can demonstrate in their strategy that: total financial exposure to these loans is proportionate; an expected credit loss model as set out in IFRS 9, Financial Instruments is adopted to measure credit risk of the loan portfolio; Appropriate credit control arrangements are in place to recover overdue repayments; and The Authority has formally agreed the total level of loans that it is willing to make and that the loan portfolio is within this limit.
5.3.3 At its meeting on the 27 July 2018, the Combined Authority approved an investment strategy for the Single Investment Fund which would seek to move towards investments of a recyclable nature, which will involve making loans to third parties. Whilst it is envisaged that these loans will be funded from the funds the Authority receives from Government through devolution and other sources, and therefore will not impact upon the revenue budget, the Investment Strategy for 2019/20 will be updated to take account of these changes.
5.4 Investments
5.4.1 As at 30 September 2018, the Combined Authority held investments of £276.7m (£324m at 30 September 2017). The chart below details the maturity profile of the Combined Authority’s investments.
Maturity profile of investment portfolio at September 2018 140,000
120,000
100,000
80,000 £'000 60,000
40,000
20,000
0 Instant Up to 3 3 to 6 months 6 to 9 months 9 to 12 months Notice (open) months
Page 307 5.4.2 At the mid-point of the year, cash holdings have reduced from the same point in 2017-18. A reduction in cash holdings has been anticipated in previous reports and reflects a realigning of income profiles and expenditure. In previous years the funding received for Local Growth Fund and Gain Share has been in excess of the expenditure on the associated projects due to the front loading of funding. The reversal of this trend will see cash levels decrease and it is forecast that cash holdings will fall further before the end of the year.
5.4.3 There is the potential for the Rolling Stock project to have a significant impact on the cash levels at the year end. It is current assumed that borrowing will match expenditure profiles. However, to the extent that there is a requirement to utilise unused grant monies or adjust the quantum of borrowing to react to changes in the interest rate environment and ensure certainty over funding for future years, the cash position could be impacted. This will be monitored throughout the year and reported in due course.
5.4.4. Despite the limited availability of high quality counterparties and continued subdued rates of return available within the market, the Authority’s weighted average rate of return is 0.85% compared with 0.62% in 2017-18. Whilst the Authority has continued to maintain a good level of return commensurate with its key investment priorities of security and liquidity, whilst Bank Rate is forecast to increase slowly, it is not anticipated that the fundamentals of the market will change before the end of the year. It is therefore envisaged that returns on investments will remain subdued for some time.
5.5 Borrowing
5.5.1 As at 30 September 2018, the Combined Authority has outstanding debt of £169.67m together with £17.16m debt transferred on the abolition of the former Merseyside County Council. The chart below shows the profile of residual maturities for external debt (excluding transferred debt).
Debt Maturity Profile 60,000
50,000
40,000
£'000 30,000
20,000
10,000
0
1 - 2- 1 years 5- 2 years
5 - 10- 5 years
Upto 1 year
10 -10 15 years -15 20 years -20 25 years -25 30 years -30 35 years -35 40 years over years 40 Maturity
Page 308 5.5.2 Based on its capital financing requirement, the Authority has an underlying need to borrow: based on the capital programme for the next three years, it is envisaged that significant borrowing will be undertaken which will reduce the under borrowed position. Interest rates and trends will be monitored closely to ensure that any borrowing is secured at the optimal point. As detailed at 5.4.3 the Rolling Stock project presents the Authority with an absolute need to borrow at some point in the year. The timing of this will be closely monitored to ensure maximum cash flow benefits.
5.5.3 The Authority has a strategy of running down cash balances in lieu of new borrowing to help minimise credit risk. This borrowing strategy is considered to still be fit for purpose.
5.5.4 As part of its treasury management activity, the Authority will consider any options to restructure its debt portfolio to improve the profile or cash flow associated with debt servicing. In the current climate and with the current structure of Public Works Loan Board interest rates, there have been no viable debt restructuring opportunities.
5.6 Treasury Limits and Prudential Indicators
5.6.1 It is a statutory duty under Section 3 of the Local Government Act 2003 for local government bodies to determine and keep under review how much they can afford to borrow. The Combined Authority’s Treasury Limits and Prudential Indicators were outlined in the approved Treasury Management Strategy. During the year the Combined Authority has operated within these limits. A copy of the current and latest projected Treasury Limits and Prudential Indicators are shown in Table 6 overleaf. Revisions have been made to the estimates to take account of anticipated level of capital expenditure over the medium term.
Page 309 Table 8 - Revised Treasury Limits and Prudential Indicators 2018/19 to 2021/22
2018/19 2019/20 2021/22 2022/23 Revised Forward Forward Forward Indicator Description Estimate Estimate Estimate Estimate Proposed capital spend to Capital Spend which the Authority plans to 314.68 178.19 146.71 78.36 commit Additional borrowing In year requirement for capital 169.78 143.00 85.00 70.36 Requirement expenditure This is the aggregation of Capital historic and cumulative capital Financing expenditure which has yet to 366.86 501.98 579.41 573.83 Requirement be paid for through either capital or revenue resources
Ratio Identified the impact and trend Financing Cost of revenue costs of capital 18.90% 18.61% 18.28% 16.67% to Income financing decisions on the Stream revenue budget
Represents the absolute limit of borrowing that could be Authorised raised and afforded in the Limit for 366.86 501.98 579.41 573.83 short term however this is Borrowing likely to be unsustainable in the long term
Operational Represents the level beyond Limit for which debt is not normally 311.12 402.46 453.41 449.51 Borrowing expected to exceed Upper Limit for Fixed Interest These limits seek to ensure 100.00% 100.00% 100.00% 100.00% Rate Exposure that the Authority does not Upper Limit for expose itself to an Variable inappropriate level of interest 30.00% 30.00% 30.00% 30.00% Interest Rate rate risk Exposure
This indicator can highlight Gross Debt where an authority may be 185.80 331.74 419.99 414.40 and the CFR borrowing in advance of need
6. RESOURCE IMPLICATIONS
6.1 Financial
The financial implications of the report are detailed above.
6.2 Human Resources
None as a direct result of this report.
Page 310 6.3 Physical Assets
None as a direct result of this report.
6.4 Information Technology
None as a direct result of this report.
7. RISKS AND MITIGATION
None as a direct result of this report.
8. EQUALITY AND DIVERSITY IMPLICATIONS
None as a direct result of this report.
9. COMMUNICATION ISSUES
None as a direct result of this report.
10. CONCLUSION
10.1 The Liverpool City Region Combined Authority is performing within its original budget allocation for 2018/19 and it is currently projected that there will be an underspend against the revised budget.
10.2 The Liverpool City Region Combined Authority continues to operate within the treasury strategy approved by the Authority in February 2018.
JOHN FOGARTY Treasurer
Contact Officers: - Sarah Johnston, Head of Finance, Merseytravel (0151 330 1015) Joanna Sawyer, Corporate Communications, Merseytravel (0151 330 1129)
Appendices: - None
Page 311
Page 312 Public Document Pack Agenda Item 19
Transport Committee
Transport Committee
6 September 2018
Present: Councillor L Robinson, Chair Councillor G Friel, Deputy Chair
Councillors R Abbey, D Baum, A Carr, J Dodd, S Foulkes, H Howard, J Jackson, N Keats, A Lavelle, S Murphy, N Nicholas, M O'Mara OBE, G Pearl, G Philbin, K Roberts, J Stockton, J Williams and F Wynn
31. Apologies for Absence
Apologies for absence were received from Councillors Paul Hayes, Patrick McKinley, Christopher Rowe and Helen Thompson.
32. Declarations of Interest
There were no declarations of interest.
33. Minutes of the Last Meeting
RESOLVED that the minutes of the last meeting of the Transport Committee held on 9 August 2018, be approved as a correct record.
Matters Arising Minute No. 28 – Merseytravel Accounts 2017-2018 Councillor Nicholas enquired about the feedback on the image.
The Chair commented that the information was fed back and was advised that it would be amended wherever possible.
Page 313 Transport Committee
34. Network Rail Presentation
The Committee received a presentation from Patrick Cawley and Marcus Barnes (Senior Sponsor, Network Rail) of Network Rail which is attached to these minutes at Appendix 1.
The presentation focused on the following: -
Liverpool Lime Street upgrade – Grade II listed building o 5,000 workers completing over 1million hours of work o 3 km of new track installed o 11km of new overhead wiring installed o 12 new point ends o 26 new signals Phase 2 – successful completion o Longer platforms o Wider platforms Capacity boost – increased services, increase in capacity and improved reliability Remaining Works – Platforms 1 and 2 o To be completed on 2 September (already completed) and 10 October 2018 Key Considerations o Transportation plans o Movement of passengers o Noise and potential disturbance to neighbouring houses/businesses o Communication approach LCR Investment - £340m Newton Le Willows – new station built within 9 months and opened in June 2018 New subway being built - without disruptions to railway, due to open in autumn Wavertree – signalling over 3 phases completed in May (Bank holiday) New services into Liverpool via Chester was a success
Members were then invited by the Chair to ask questions of the Network Rail representatives.
Councillor Friel expressed his thanks for the work done on Liverpool Lime Street Station and its delivery and enquired about the investment Merseytravel were making in rolling stock and why not Network Rail? He also enquired about the issues with the way in which the prices were constructed for Maghull North and stated that it was not fair and equitable in terms of the funding and being delivered.
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Patrick Cawley informed the Committee that in relation to the rolling stock, he had been to Switzerland to see the project and there was a lot of certainty in terms of tackling the development of the project and working with a client who knew what they want like Merseytravel. He also said that it helped if the client supported and understood the risks etc. He stated that he managed portfolios of projects and programmes for Network Rail and worked closely with colleagues. Network Rail did not take a profit and dealt purely with costs as the rail regulations were clear and guidelines were based upon how it is built and balanced across the industry and portfolio. Risk always sits with the client and money does not line any pockets as it is strictly governed by the regulator, in terms of delivery etc.
Councillor Keats expressed concerns regarding the delivery of the platforms and the large amounts of detritus on the line between Kirkby and Liverpool Central Station and enquired about how it would be cleaned and whether or not it would be monitored regularly. He also stated that Liverpool Central Station is one of the busiest stations and would Network Rail be considering any investment?
In relation to Liverpool Central Station Patrick Cawley advised that there were capacity challenges and that it was a busier station than Liverpool Lime Street during peak times. He was aware that significant intervention was needed and that a capacity study would be completed about options around what could be done collectively at the station with the outcomes and outputs due by the end of the year which would be shared with the Committee. Regarding the detritus on the line, Patrick Cawley advised that he would speak to the local maintenance team and ask that it be investigated and that it would be sorted. There was also a mandate to make sure that tracks and line-sight should be kept clear, but that it needed to be monitored more closely which would take time to keep on top of it.
Councillor Lavelle enquired if Network Rail would support the call for brand new lines for Liverpool in the HS2 project?
Patrick Cawley confirmed that he had previously been asked to support the Transport for the North and the HS2 line and was happy to lend support to the Liverpool region.
Councillor Carr thanked Network Rail for everything done so far, but stated that neighbours had a horrific time with the contractors and enquired about how it will be changed in the future given the programme of stations?
Patrick Cawley commented that there were lessons to be learnt from more effective dialogue with neighbours and dealing with platforms and rolling stock preparation. It could have been better channelled on the railway, but regrettably work gets done when people are in bed, as the network has to run during the day. In future Network Rail would try and mitigate it, but more needs to be done and he would need to apologise to those who have been disrupted.
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Councillor Foulkes thanked Network Rail for the Lime Street delivery and the slab track project on Hamilton Square and enquired about lessons to be learned and whether Network Rail would be sharing good practices around the country?
Patrick Cawley stated that the slab-track on Hamilton Square had been a really challenging job and that it was handed back 12 hours late, with a lot of lessons to be learnt both logistically and in communications. Working with Merseytravel had been well planned and delivered with a lot of engagement and lessons learned and it was a message to be shared around the country about Merseytravel regarding the collaborative working and the successes.
Councillor Williams stated that Merseytravel had long argued for better northern routes, but there had been problems of implementation of timetables and a northern route was needed and should be re-visited.
Councillor Roberts expressed concerns with the announcement for the December timetable, as Glasgow was supposed to start in December 2018, but would not be delivered until May 2019 and as Network Rail was unable to deliver the services which were three times a day, could it be revisited to ensure services start in December 2018 as planned. He also enquired about the missing Bessie Braddock statue from Liverpool Lime Street Station.
Patrick Cawley stated that with regards to the failure of the timetable, it was very complex and difficult but would not have changed the project delivery or challenges. Timetable change was down to a lot of reasons, so it would be difficult to respond. He apologised for the May timetable and the knock on effect it had on the industry and the network, but would be happy to take the questions and comments away and feedback to Network Rail. He also confirmed that the missing Bessie Braddock statue would be returned shortly to Liverpool Lime Street Station.
Councillor Nicholas thanked Network Rail for the delivery of the stations on time and working with the communities and stated that Maghull North and Newton-Le-Willows were both delivered with significant costs overrun and enquired if there was a reason why it was over and if Network Rail would pay for the over-run?
Patrick Cawley commented that Newton-Le-Willows was a difficult project with the kind of embankment experienced which required cutting through with heavy civil engineering machinery, so the additional costs were unforeseen. Regarding Maghull North Station there was a genuine project risk to deal with and it would be difficult to say that Network Rail should have paid for the over- run. Similar projects always run a risk of overspend, however, everything was fully transparent about the costs.
The Chair stated that the May timetable was pretty horrific and commented that someone needed to take responsibility and be held to account and enquired about what was being done as the network provider?
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Patrick Cawley informed the Committee, that the Chair was right about the impact on the infrastructure and the way the timetable was delivered. He also stated that it was a difficult summer and it’s good when it performs well and the services are delivered on time. However, it is not being used the way it was built and so it can cause issues as is currently being experienced with a lot of delays on the network, the hot summer and the fires on the line which has contributed to those issues and been difficult to manage. In the short term work was being done on train operating planning teams and performance had been improving across the corridor and would get better moving into the autumn. Train capacity on the corridor was being looked at and as the Secretary of State suggested, digital railway was an option. The medium and long term plan was about making it fit for purpose.
The Chair stated that the Merseyrail network was ready with the new trains already being manufactured and enquired about why didn’t Network Rail join in and support the infrastructure and contribute to the work with the added benefit of upgrading the network and re-charging back to the operators?
Patrick Cawley stated that from the Network Rail perspective the work being done for Merseytravel was worth it and with the new trains coming which would be faster performing trains and better capacity, the infrastructure would be for the customer.
The Chair commented that Network Rail would get a lot of benefits and be involved in the most accessible and equitable upgrades across the country which could then be shared. He also enquired about what was being done with the rolling stock and whether it should be lighter and wouldn’t Network Rail get the benefit, if there was a lot of money being put in.
Patrick Cawley informed the Committee that he was aware of it and would be open to it.
The Committee noted the presentation and thanked Patrick Cawley and Marcus Barnes from Network Rail for their responses and attendance.
35. Quarter 1 Merseytravel Corporate Plan Performance and Financial Monitoring Report 2018/19
The Committee received a report of Merseytravel presented by Sarah Johnston (Head of Finance) and Stephen Littler (Performance Manager) relating to the Merseytravel Corporate Plan Performance and Financial Monitoring Report 2018/19.
Members enquired about the following:
Paragraph 4.3 – Bus Services (Favourable/Unfavourable column), what does the £6,000 mean?
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Paragraph 4.11 – 4.13 – will the reserves be affected? Paragraph 5.2 – KPI 3 refers to Ferries are slightly above target and then KPI 4, refers to Mersey Ferries is above target but Leisure is slightly below. Which is it? Paragraph 5.2 – KPI 4, Punctuality – are messages getting across to providers? Paragraph 5.2 – KPI 6, could the mystery shopper be extended? Appendix B – Merseytravel monthly revenue financial monitoring report to June 2018, Total Employees – could the number also be included?
Sarah Johnston informed the Committee that in relation to paragraph 4.3 and the £6,000, it reflected the spend to date from a £4m budget. She also stated that the reserves would not be affected.
Stephen Littler informed the Committee that in relation to the KPIs, he would communicate the concerns to the Head of Bus and amend/clarify accordingly where required.
Councillor Steve Foulkes informed the Committee that £8.5m worth of savings would have to be delivered which was a similar position to that of last year, so it was going to be a tough budget. There were plans for the reserves, so it would be a tough year.
The Chair thanked the officers for providing an open and transparent report in terms of risks etc and encouraged the officers to look into how it would be managed. He informed the Committee that the discussions have already started with the Metro Mayor and they would be looking at ways to mitigate any difficulties. He also reminded everyone that they were “mystery shoppers” each day, being the eyes and ears of the organisation in the interest of the travelling public.
RESOLVED that the contents of the report with the agreed amendments be noted.
36. Responses to National Consultations (Bus Services)
The Committee received a report of Merseytravel presented by Suzanne Cain (Transport Policy Co-ordinator) relating to the responses to the national consultations and alerted members to two open consultations by the Department for Transport (DfT) on ways to improve information for bus passengers through the Bus Services Act 2017 and on open data legislation and to a Transport Select Committee inquiry into the decline of the bus market in England outside London.
Members asked that the following responses and feedback be captured in the responses to the consultation: -
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Equality and Diversity Implications – disabled and low income families would not purchase tickets if prices increased and it would need to be looked at in terms of demographics in comparison to London. Paragraph 6.1 – can “Members are reminded of the requirements” be omitted, because it was usually in each report and members were aware of it. There was an issue around the decline in the bus routes, but Merseyside was “bucking the trend” and increasing the usage e.g. quality of vehicles and the Bus Alliance. It has all helped and despite the biggest barriers being low incomes and affordability and the impact on Local Government relating to cuts and austerity, it does dis-enfranchise members of the community. In rural areas wholesale bus routes are being removed, which isolates large pockets of communities. Excellent responses have been collated. Government will obviously transfer responsibility without the cash and the responses should stress this, that the resources and cash are needed to make changes.
Suzanne Cain informed the Committee that all the comments and feedback would be taken into account when collating the final response and informed the Committee that in relation to paragraph 6.1, although the members were already aware, it was important to keep the statement to “hammer” home the idea to the decision makers.
The Chair informed the Committee that he had been working with the relevant bus representatives and will do a final email for feedback before sending it off to the officers, to ensure it was a strong response. He stated that Open Data was confusing at times because it had not been an obligation for the bus service in comparison to what had been done with the trains and ferries and audio-visual displays should already be on buses as the public needs to get information and it should be in the bus industry as soon as possible.
RESOLVED that: -
a) The draft responses to the DfT consultations as appended to the report and the proposed broad content of the responses to the Transport Select Committee call for evidence be considered and amended accordingly; and
b) Delegated Authority to the Director of Policy and Strategic Commissioning in conjunction with the Chair of the Transport Committee, to agree the finalised responses for submission on behalf of the Liverpool City Region Combined Authority ahead of the September deadlines be granted.
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37. Responses to Department for Transport Consultations (The Future of Mobility and Last Mile Freight and Logistics)
The Committee received a report of the Director of Policy and Strategic Commissioning presented by Alex Naughton (Transport Policy Officer) relating to the responses to the national consultations and alerted members to two open consultations by the Department for Transport (DfT) on the Future of Mobility and Last Mile Freight & Logistics.
Members asked that the following responses and feedback be captured in the response to the consultation: -
In relation to paragraph 4.4.2 the infrastructure would cost money and if it was not coming from Government, then it would prevent the roll out of the strategy and restrict any progress. Electric vehicles could be a savings for larger companies e.g. Amazon etc. and the infrastructure should be looked at in cities and where the Government was investing. Deliveries by drones was already under consideration for large organisations like Amazon in relation to the vehicle congestion and time taken in city centres.
The Chair informed the Committee that Transport for the West Midlands are in advance talks with local trains to include delivery sections on board. He stated that the draft response was good and it would be great to include the issues raised made regarding the congestion and deliveries.
Alex Naughton thanked everyone for their contributions and advised the Committee that he would revise the draft response accordingly before submission.
RESOLVED that: -
a) The importance of responding to two salient consultation documents that linked closely with the Liverpool City Region Combined Authority and its Transport Committee’s policies and ambitions and provided comments and observations in response be noted and amended accordingly; and
b) Delegated Authority to the Director of Policy and Strategic Commissioning in conjunction with the Chair of the Transport Committee, to agree the responses for submission on behalf of the Liverpool City Region Combined Authority ahead of the September deadlines be granted.
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38. Department for Transport Consultation on the Cross Country Passenger Rail Franchise
The Committee received a report of Merseytravel presented by David Jones (Rail Development Manager) relating to the draft responses to the public consultation document proposed for a new Cross Country Passenger Rail Franchise and sought members views on the proposed response.
Members asked that the following responses and feedback be captured in the response to the consultation: -
Questions 13 -16 made reference to smart ticketing, the response needed to be more detailed and should reflect technology and provisions for the younger generation in terms of “apps” etc. Question 21-22 made reference to carriage layouts, but there was a lack of luggage space on trains for it to be stored securely and safely, could this be addressed in the response. The outline was right and the service should return, but the response should include raising the issues with franchises as well.
David Jones thanked everyone for their contributions and advised the Committee that he would revise the draft response accordingly before submission.
The Chair commented that it was a good draft response and requested that all the comments be taken on board about the Cross Country franchise. He also stated that as a region it needed to connect to the South of England and that a lot of work has been done with the Welsh Government to improve connections and service delivery.
RESOLVED that: -
a) The draft response to the Department for Transport’s consultation attached at Appendix A to the report be considered and amended accordingly; and
b) Delegated Authority to the Director of Policy and Strategic Commissioning in conjunction with the Chair of the Transport Committee, to agree the finalised responses for submission on behalf of the Liverpool City Region Combined Authority be granted.
39. Public Question Time
No questions were submitted for this item.
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40. Petitions and Statements
Statement submitted by Karen McDonald The Chair advised the Committee that a public statement had been received from Karen McDonald, a resident in Rainford regarding the reduction of a Bus service from Rainford to St Helen’s and a reduction in the bus service regarding the Arriva route.
The Chair confirmed that he would provide a written response to Karen Donald.
Petition submitted by Councillor Michael Haw The Chair advised the Committee that a petition with approximately 600 signatures had been submitted by Councillor Michael Haw of St Helen’s on behalf of residents in Eccleston requesting the re-introduction of the 137/138 and 184/195 hourly bus services that served Eccleston and Eccleston Park in St Helen’s which were recently withdrawn from service.
The Chair informed the Committee that the Transport Committee did not control the whole of the bus network and it would be difficult to tell the bus networks what they could and couldn’t deliver, given that there had been cuts across the region, but Merseytravel had done a lot to ensure that the region lost a minimum number of routes.
The Chair confirmed that he would provide a written response to Councillor Haw.
The Chair addressed the meeting about the petition that had been submitted by Councillor Haw and expressed his annoyance at the Liberal Democrat Focus leaflet that provided the contact details of the junior officer at Merseytravel including an email address and mobile number. He believed that it was not a mistake and was meant to target and intimidate the officer concerned, as Councillor Haw had done this previously and was warned about it.
Councillor Pearl informed the Committee that he would provide the feedback to Councillor Haw and that the officers’ mobile number should not have been included on the leaflet and he assured the Committee that it would not happen again.
The Chair confirmed that he would be seeking the appropriate reparations and an apology from Councillor Haw.
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41. Any Other Urgent Business Approved by the Chair
There was no other urgent business.
______CHAIR
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